England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
CROWN OFFICE LIST

		Royal Courts of Justice The Strand London
		25 March 1998

1. MR JUSTICE HIDDEN: The applicant is a lady in her mid-seventies, now retired, who began caring for her invalid daughter at her birth in 1968 and who left her employment on voluntary redundancy on 29 April 1982. She later became entitled to retirement pension, having reached the age of 60 on 19 May 1983. Three years later, on 14 October 1986, at the age of 63, she applied for Invalid Care Allowance ("ICA"), which claim was disallowed by an Adjudication Officer on 24 December 1986. It was disallowed again when reconsideration was requested, the date of disallowance being 26 January 1987.
2. On 15 May 1995 the Adjudication Officer reviewed his decision and decided that, though she was entitled to ICA from 28 October 1964 (the day United Kingdom law was amended to comply with the decision of the European Court of Justice in Secretary of State for Social Security v Thomas and Others [1993] ECR 1-1247), it was not payable because her retirement pension was more than or equal to the allowance and thus the overlapping provisions applied to deprive her of ICA.
3. On 9 July 1996 the Social Security Appeals Tribunal allowed her appeal, holding that she came within the scope of Directive 79/7 and was entitled to ICA from and including 14 October 1985.
4. In December 1996 the applicant received an award of £1,884.00 for arrears of Carer's Premium, extra income support payable to a person entitled to ICA for the whole period she would have been entitled to the payment but was precluded from getting it because of domestic law. On 25 September 1995 and 15 January 1997 the applicant's solicitors wrote to the respondent seeking damages, including interest on the late payment. On 10 April 1997 the respondent's solicitors replied, stating that the applicant had not suffered financial loss and that it was not accepted that the breach of the Direction was serious enough so as to give rise to a claim for damages. Further, there was no provision for the payment of interest.
5. On 13 May 1997 the respondent's solicitors wrote to state that interest was not payable on arrears of a Social Security benefit paid as a result of European law and referring to the European Court of Justice judgment in R v Secretary of State for Social Security, ex parte Sutton [1997] ECR 1-2163. That case had only been decided on 22 April 1997.
6. It was those last two letters, namely those of 10 April and 13 May 1997, which the applicant seeks to impugn in these proceedings, in that she seeks to attack the decision therein contained: that she is not entitled to damages and interest, in that the European Court of Justice had confirmed in Sutton the Advocate General's opinion that interest was not payable on arrears of Social Security benefit paid as a result of the direct effect of European law.
7. Directive 79/7/EEC, by Article 3, applies to statutory schemes which provide protection against invalidity. Article 4 enacts that:

"The principle of equal treatment means that there shall be no discrimination whatsoever on ground of sex .... in particular as concerns:

-- the scope of the schemes and the conditions of access thereto ...."

8. Article 7 (1) enacts:

"This Directive shall be without prejudice to the right of Member States to exclude from its scope:

(a) the determination of pensionable age for the purposes of granting old-age and retirement pensions and the possible consequences thereof for other benefits;"

9. It is the construction of those last eight words with which this application is particularly concerned. Mrs Scullion claimed that she was entitled to damages, and particularly interest for late payment of ICA, a Social Security benefit to which she was entitled by reason of the direct effect of Council Directive 79/7. She was deprived of her payments because of the United Kingdom Government's failure properly to implement that Directive, and in particular the failure to remove the discriminatory provisions in relation to pension age, which had the effect that a woman could not claim ICA for the first time after the age of 60, whereas a man had another five years until he reached 65 in order to make a claim. Those domestic provisions were ruled to be incompatible with Community law in Thomas.

In Sutton the court ruled at paragraph 31:

"First of all, it should be noted that, as the Court has repeatedly held, the principle that the State is liable for loss and damage caused to individuals as a result of breaches of Community law for which the State can be held responsible is inherent in the system of the Treaty ...."

10. The judgment then set out a number of well-known cases including Francovich Joined Cases C-46/93 and C48/93 and Brasserie du Pecheur and Factortame [1996] ECR 1-1029. I need not name them all.
11. Paragraph 34 read:

"It is for the national court to assess, in the light of the foregoing, whether in the context of the dispute before it and of the national procedure Mrs Sutton is entitled to reparation for the loss which she claims to have suffered as a result of the breach of Community law by the Member State concerned, and, if appropriate, to determine the amount of such reparation."

12. The answer the court gave on its reference appears for the first time in paragraph 35. It reads:

"The answer to the question submitted by the High Court of Justice must therefore be that Article 6 of Directive 79/7 does not require that an individual should be able to obtain interest on arrears of a social security benefit such as invalid care allowance, when the delay in payment of the benefit is the result of discrimination prohibited by Directive 79/7. However, a Member State is required to make reparation for the loss and damage caused to an individual as a result of the breach of Community law. Where the conditions for State liability are fulfilled, it is for the national court to apply that principle."

13. No further steps were taken in the Sutton case because Mrs Sutton had unfortunately died before the European Court of Justice judgment, but it is essentially the issue raised in paragraph 34 of that judgment which comes before this court now, in which the applicant submits that the conditions for state liability are fulfilled by the United Kingdom's failure to remove the discriminatory provisions governing the payment of ICA and that state liability includes liability for interest payments. The respondent submits that, on the contrary, the applicant does not have an arguable case that the respondent's breach gives rise to a claim in damages.
14. The relevant principles as to state liability are set out in a number of cases, including R v Her Majesty's Treasury, ex parte British Telecommunications [1996] ECR 1161, and more particularly at paragraphs 38, 39 and 42. Paragraph 38 reads:

"It should be recalled, as a preliminary point, that the principle of State liability for loss and damage caused to individuals as a result of breaches of Community law for which the State can be held responsible is inherent in the system of the Treaty.... It follows that the principle holds good for any case in which a Member State breaches Community law....."

15. The relevant authorities are therein set out. Paragraph 39 reads:

"In the latter judgment the Court also ruled, with regard to a breach of Community law for which a Member State, acting in a field in which it has a wide discretion in taking legislative decisions, can be held responsible, that Community law confers a right to reparation where three conditions are met: the rule of law infringed must be intended to confer rights on individuals; the breach must be sufficiently serious; and there must be a direct causal link between the breach of the obligation resting on the State and the damage sustained by the injured parties."

16. Paragraph 42 reads:

"According to the case-law of the Court, a breach is sufficiently serious where, in the exercise of its legislative powers, an institution or a Member State has manifestly and gravely disregarded the limits on the exercise of its powers.... Factors which the competent court may take into consideration include the clarity and precision of the rule breached."

17. Of the three conditions for state liability, namely that the rule of law infringed must be intended to confer rights on individuals, the breach must be sufficiently serious and there must be a direct cause or link between the breach of the obligation resting on the state and the damage sustained by the injured party, the point taken by the respondent is the submission that it is not arguable that the United Kingdom's breach of Directive 79/7 is sufficiently serious for there to be a liability in damages. The respondent submits that when there is a misinterpretation of a Directive the Member State only commits a sufficiently serious breach of Community law when it manifestly and gravely disregards the limits of its discretion, and for that to occur there must be an obvious breach of the Directive in issue.
18. The respondent secondly submits that the United Kingdom did not manifestly and gravely disregard the limits of its discretion under Directive 79/7 in maintaining the different age limits, and that the breach of the Directive was not obvious.
19. The respondent submits that a remedy in damages is available only in exceptional circumstances and seeks support from the words of Advocate General Jacobs in Denkavit International and others v Kamer van Koophandel en Fabieken voor Midden-Gelderland [1996] ECR 1-2827, at paragraph 78:

"The special conditions for State liability are linked to its exceptional character as a remedy that goes beyond ordinary administrative remedies by providing compensation for loss or damage arising from flagrant legislative or administrative misconduct."

20. Further support for the restrictive approach is drawn from British Telecommunications at paragraphs 40, 42 and 43. A similar situation arose in the second Denkavit case of that year, Denkavit International BV v Bundersamt fur Finanzen [1996] ECR 1-5063, in which the court considered the clarity and precision of the rule breached, the views of other Member States, and the fact that there was no previous case law from the European Court of Justice on the Directive in question. The respondent sought to distinguish the position in British Telecommunications and Denkavit from that of the court in Francovich and Dillekofer [1996] ECR 1-4845, at paragraphs 25 and 26. At paragraph 25 the court said:

"On the one hand, a breach of Community law is sufficiently serious if a Community institution or a Member State, in the exercise of its rule-making powers, manifestly and gravely disregards the limit on those powers.... On the other hand, if, at the time when it committed the infringement, the Member State was not called upon to make any legislative choices and had only considerably reduced, or even no, discretion, the mere infringement of Community law may be sufficient to establish the existence of a sufficiently serious breach."

21. At paragraph 26 the court said:

"So where, as in Francovich a Member State fails in breach of the third paragraph of Article 189 of the Treaty, to take any of the measures necessary to achieve the result prescribed by a directive within the period it lays down, that Member State manifestly and gravely disregards the limits on its discretion."

22. There there was a non-implementation of a Directive and the discretion of the Member State was very limited, if not non-existent.
23. The respondent further argued that Brasserie du Pecheur [1996] ECR 1-1029 showed that one looked at both the rule and the exception in order to see whether a particular rule was clear.
24. The respondent submitted that R v Secretary of State for the Home Department, ex parte Gallagher [1996] 2 CMLR 951 showed that the United Kingdom courts followed the European Court of Justice in taking the same restrictive approach to liability for incorrect implementation of a Directive.
25. The respondent argued that the issue here in relation to the words "the possible consequences thereof for other benefits" was whether the error was an obvious one, i.e. was it in manifest and grave disregard of the limits of its discretion?
26. The respondent submitted that there was no obvious meaning for those words "the possible consequences thereof for other benefits" and that they did not bear the hallmarks of "clarity and precision" referred to in British Telecommunications . There was no preamble to Directive 79/7 which could assist and the wording of the Article in itself provided little guidance, as Advocate General Van Gerven stated in R v Secretary of State for Social Services, ex parte EOC [1992] ECR 1-4297. The respondent submitted that the difference of view between that put forward by the United Kingdom and that adopted by the European Court of Justice was within a pretty small compass. The dispute was as to the scope of the admissible link and whether that link was satisfied in the case of ICA. The respondent conceded that the European Court of Justice did not accept the link put forward by the United Kingdom. The court had held that the link between "other benefits" and pension schemes permitted discrimination based on pensionable age in "other benefits":

".... only if such discrimination is objectively necessary in order to avoid disrupting the complex financial equilibrium of the Social Security system or to ensure consistency in retirement pension schemes and other benefit schemes." (para 12)

27. The respondent argued, rightly, that the applicability of Article 7(1)(a) to ICA was not clarified until the European Court of Justice decision in Thomas.
28. The respondent finally drew attention to Graham [1995] ECR 1-2521 as providing further support for the proposition that the argument was not wholly without merit that the United Kingdom was entitled to treat pensionable age as the date when persons would normally cease to work. The respondent conceded that Graham was a case where the benefits were contributory, unlike those in issue in Thomas. The respondent submitted that the United Kingdom's interpretation of Article 7(1)(a) was not obviously wrong.
29. Against those submissions the applicant argued that the principle of equal treatment set out in Directive 79/7 was consistently described by the case law as of fundamental importance (see, for instance, Marshall No 1 [1986] QB 401). ICA was a non-contributory benefit which was payable beyond pension age to a man or woman who was not working but who was looking after a relevant invalid, provided that the claimant was entitled to it immediately before pension age. However, it was not payable to a claimant who did not claim for the first time until after reaching pension age. It was thus clear that those features were always going to cause severe problems for any argument that the shape of ICA, and in particular the cut-off date of the pension age in respect of fresh claims only, fell within Article 7(1)(a). In particular, the non-contributory nature of the benefit would prevent the possibility of any successful argument that the financial structure of the Social Security system militated against a common cut-off age for men and women, since cost alone could not be a good defence to a discrimination claim.
30. Again any claim that the general shape of the system required that women who claim for the first time after 60 should fail to qualify was likely to fail by reason of the fact that women who did claim successfully before 60 continued to be paid benefit after 60. It was particularly significant that women who had gone on working after 60, before the risk materialised, and who were most obviously deserving of the benefit, were precisely those who did not qualify.
31. The applicant drew support from the decision in the EOC case and particularly the passage at paragraph 15 as to the purpose of derogation.
32. The applicant also drew support from the failure of the respondent in Thomas before the Court of Appeal and before the European Court of Justice. The European Court followed the same route as the Advocate General's opinion that the derogation had to be construed strictly, and its purpose was as laid down in the EOC case. He further said that, as the benefits were non-contributory, there could be no impact on the financial mechanisms set up and added trenchantly:

"More generally, I must say that the view that the link between the difference of pension ages and the benefit in question is necessary to preserve the financial equilibrium of the entire social security system seems to me to be untenable ...."

33. Later, at page 570 he said:

".... nor does it seem to me reasonably arguable that the grant of the benefits in question to women who have already passed pensionable age is liable to prejudice the consistency of the social security system."

As to Graham, where the court held the derogation legitimate, having regard to Article 7(1)(a), the applicant submitted that the fact that the benefits in Graham were contributory, rather than non-contributory, was an essential part of the background to that judgment. As to state liability, the applicant submitted that the breach was a serious one. The test was not one of intent or negligence. Where there was a wide discretion as to legislative policy, the issue was whether the Member State had "gravely and manifestly disregarded the limits of its powers" ( British Telecommunications ). But where there was no discretion and no need to make legislative choices the "mere infringement of Community law may be sufficient to establish the existence of a sufficiently serious breach", and the mere fact that the national court had referred the matter to the European Court of Justice as to whether or not there had been a breach did not mean that the breach could not be regarded as serious within the test: see R v Ministry of Agriculture, Fisheries and Feed, ex parte Hedley Lomas (Ireland) Ltd [1997] QB 139.

34. The applicant submitted that in the instant case the United Kingdom did have to legislate to remove discriminations not within Article 7(1)(a), and did not have a wide discretion. I am satisfied that that is an arguable proposition. The purpose of the derogation was apparent on the face of the Directive, particularly when Article 8 was considered, and in deciding whether or not a particular set of domestic provisions fell within the derogation that was the only policy that the Member State was entitled to take into account.
35. As to the argument put against it about the clarity brought by the decision in Thomas, the applicant's case was that the purpose of the derogation was apparent on the face of the Directive, and it was always clear that a non-contributory benefit paid beyond pension age to someone entitled to it before pension age, but not to someone who had not claimed it before pension age, did not need to have a cut-off date fixed at differential pension ages in order to allow those differential ages to continue. The applicant reiterated that the United Kingdom Government had lost decisively in Thomas before the United Kingdom Court of Appeal and the European Court of Justice. The applicant submitted finally that the respondent was always going to have the basic difficulty of defending a decision to have a discriminatory cut-off date for a non-contributory benefit.
36. I have considered the arguments on both sides very carefully. Were I to be facing the task not of deciding the question of whether or not leave were to be granted but of deciding a substantive hearing of an application for judicial review, it might well be that, at the moment on the arguments put before me, I would have to conclude that the arguments of the respondent had the edge. That, however, quite clearly is not the task before me. I have only to decide whether the arguments of the applicant are arguable. I am satisfied that they are and it follows that leave must be granted in this case.
37. MR VAJDA: My Lord, could I first of all ask for leave to appeal?
38. MR JUSTICE HIDDEN: No, I think you will have to get leave to appeal from the higher court.
39. MR VAJDA: Secondly, could I invite your Lordship to extend the normal period of 56 days for filing affidavits? Your Lordship will appreciate from the hearing last week that this is very different from a normal judicial review. One is going back to events which took place over ten years ago. Those instructing me request a period of three months rather than 56 days, given that this is essentially a private law action concerned with events which took place a long time ago. I would invite your Lordship to accede to that application.
40. MR JUSTICE HIDDEN: I should not think there is any objection to that, but I will see if there is. Mr Taghavi, is there any objection to that?
41. MR TAGHAVI: My Lord, no specific objection. I would submit that 56 days is more than enough.
42. MR JUSTICE HIDDEN: No, I think in this case I will give three months.