Neutral Citation Number: [2008] EWHC 2056 (Admin)
Case No: CO/5697/2008
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 27/08/08 

Before :

THE HONOURABLE MR JUSTICE WYN WILLIAMS
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Between :

	PROSPECT
	Claimant	
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MINISTRY OF DEFENCE	
Defendant	

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Mr Gavin Millar QC (instructed by Messrs Russell Jones and Walker Solicitors)
 for the Claimant
Mr Hugh Tomlinson QC (instructed by The Treasury Solicitor) for the Defendant

Hearing dates: 19 August 2008
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Judgment
Mr Justice Wyn Williams : 
1.	In March 2008 the Defendant published a document entitled “MOD Early Release Scheme (2008)” (hereinafter referred to as “ERS (2008)”) to a very significant number of its civilian staff. Its aim, as expressed in the introduction to the Document, was to assist the Defendant to achieve 

“…….. the civilian staff reductions required during Planning Round 08, including the restructuring under the Streamlining and Pace programmes.”

2.	The document further provided in paragraph 6 that:-

“The Early Release Scheme is voluntary and interested eligible staff should apply for Early Retirement or Early Severance (as appropriate according to age and proposed date of departure) on Flexible (“FER/S”) terms or Compulsory (“CER/S”) terms, or the equivalent in their own scheme.”
 
3.	In these proceedings the Claimant alleges that the invitation to eligible staff to apply for early retirement or early severance on Flexible terms (hereinafter called “F terms”) was unlawful. The Claimant contends that the Defendant was entitled only to invite its staff to apply for early retirement or early severance on Compulsory terms (hereinafter referred to as “C terms”).
 
4.	I should record at the outset that when these proceedings were commenced there were two Claimants. However, on 18 August 2008, the then Second Claimant, Public and Commercial Services Union (PCS), served notice of discontinuance. 

5.	I should also record at the outset that I regard the issue identified in paragraph 3 above as properly arguable. That being so I grant permission to the Claimant to pursue a claim for judicial review and I turn to deal with the substance of the claim. 

RELEVANT FACTUAL BACKGROUND
 
6.	ERS (2008) was launched in the context of two major programmes known as “Streamlining” and “PACE”. Those programmes, themselves, came into existence in a wider context. According to Mr Richard Hatfield, the Personnel Director for the Ministry of Defence, that wider context was the continuing and increasing heightened operational demands faced by military personnel and the very tight financial constraints on Defence expenditure in two successive Government Spending Reviews which took place in 2004 and 2007. 

7.	As I understand it the document which set outs the Streamlining programme was published on 23 October 2007. The document is substantial but its flavour and its relevance to the present dispute can be gleaned from paragraphs 5 to 8 of the document. These paragraphs are headed “Aim and principles” and read as follows:- 
“5. We want to create: 
a.	   a Department which plays its full part in wider government decision-making about the security of the UK and international security policy and a Head Office which operates on the basis of an informed view of the strategic situation;
b.  	 a Department which is agile, reacts quickly to changing circumstances, makes good decisions quickly for the short and long term and makes them stick; 
c.	 a Head Office which has the right number of people of the right quality working only on tasks that must be carried out at the Centre;
d.   	a Department with an agreed business framework in which the relationship between Head Office and other areas is understood by all parties, where there is clear delineation of responsibilities and no duplication of work;
e.   	collective responsibility for delivering the best outcomes for Defence-led from the top with Board Members articulating and driving the decisions made by the Board;
f.  	 a Department which builds on its unified civil-military structure which reflects the MoD’s dual and complementary functions as a Department of State and strategic military headquarters, and ties closely together strategic planning with a focus on delivery. 

6. 	Many of the Board’s specific proposals below focus on structural changes. These are necessary to enable change to take place and savings to be realised, but will not by themselves be enough. We need to change our approach to work as well. The Board will collectively and individually act to ensure that they create clear responsibilities and authority, getting rid of the lack of personal accountability and the inefficiency of ‘lowest common denominator’ consensus-driven advice. We will bear down on the culture of over-briefing and unnecessary staff work. We will foster an atmosphere in which making things happen in the most efficient way possible is the default setting.

7. 	Through reducing unnecessary process, cutting committees and over briefing, removing duplication, and building a more strategic, focused Head Office, our proposals enable us to meet the Board’s target of reducing the size of Head Office by 25%. The number of London-based staff, both Service and civilian, amounts to around 5000. To reduce this by 25% involves the loss of some 1,300 posts, with a further 800 potentially relocated out of London. We do not under estimate the scale of this change or the impact on staff. This document sets out in broad terms how those changes will be managed, though specific decisions will be taken in the light of the whole Departmental picture and following consultation.

8. 	The Department assumed for planning purposes that Streamlining will generate ongoing cost savings of some £50M per year by 2010/11 (which represents approximately 25% of the Head Office costs in 2007). The reductions above will enable us to meet that saving and possibly exceed it.”

8.	I need not set out the aims and principles relating to PACE. I say that for the simple reason that both the Claimant and Defendant accept that its aims and principles were very similar, so far as relevant to this dispute, to those which I have set above in respect of Streamlining. 
 
9.	In advance of the publication of ERS (2008) the Defendant published a consultative document. Its aim was to explain the options for ERS (2008) 

“in order to achieve the civilian staff reductions required through the Streamlining programme ………”

The object of the consultative document was to provide a basis for the Defendant to consult trade unions on relevant proposals.

10.	The consultative document contained various proposals: A key proposal was:-

“We propose that applicants will be asked to nominate the terms on which they are prepared to be released, in the knowledge that cost will be a key selection criterion. They will be given access to cost information on both “F” and “C” terms before submitting an application, in order that they are fully informed.”
 
11.	Under the heading “Background” the following sentence appeared:- 

“The Department is not in a redundancy situation and it is the Department’s aim to achieve the restructuring and reductions entirely through voluntary early release and natural wastage, if this is possible, consistent with business needs.”

12.	In due course the Claimant and PCS replied to the consultative document. It suffices that I say that in their replies they adopted a stance which the Claimant has maintained in this litigation namely that it was not lawful for the Defendant to invite its employees to apply for early release on “F” terms. 

13.	Notwithstanding the objections of the Claimants, the Defendant published ERS (2008) in March 2008. The document published described the selection process which would be put in place. It made it clear that decisions on applications would be made using stated criteria which included cost to the Defendant. It is common ground that the retirement/severance of an individual on “C” terms is more costly to the Defendant than retirement/severance on “F” terms and, therefore, it is also common ground that some of those employees of the Defendant who would be attracted by the possibility of early retirement/severance might consider that their chances of being selected were enhanced if they chose “F” terms.
 
14.	As I understand it approximately 3000 individuals volunteered for early retirement/severance following the publication of ERS (2008). Of those, around 900 applied for release on “F” terms.
 
15.	It is also worth observing that ERS (2008) is not the first scheme of its type. The Defendant published a scheme which was identical, for present purposes, in 2005. It is right that I record that the Claimant and PCS took the same stance in relation to that scheme as the stance which the Claimant maintains in this claim. In respect of this earlier scheme, however, no challenge by way of judicial review was launched. The evidence put in by the Defendant demonstrates that since 2004 the Department for Work and Pensions has reduced staff numbers from approximately 130,000 to approximately 100,000. These reductions have been achieved using a number of separate schemes but, on occasions, at least, schemes have offered “F” terms either alone or in combination with other terms. Further, as I understand it, HM Revenue and Customs has reduced numbers by using schemes which include offers of retirement on “F” terms. In respect of the schemes operated by these other Departments there has been no opposition by the relevant trade unions in the sense that those unions have not taken the point which is raised in these proceedings. 

LEGAL FRAMEWORK

16.	It is now accepted that civil servants have contracts of employment. see R v The Lord Chancellor’s Department ex parte Nangle [1991] ICR 743. It is not suggested, however, that the issue raised in this case can be resolved by reference to the contracts of employment which exist between the Defendant on the one hand and its employees on the other. 
 
17.	On 15 March 1995 an Order in Council was made “relating to the appointment of persons to situations in Her Majesty’s Home Civil Service and for regulating the conduct of Her Majesty’s Home Civil Service and the conditions of service therein ……….” By paragraph 10 of the Order the relevant minister was empowered to make regulations and give instructions:

“(a) 	providing for the number and grading of posts in the Service, the classification of all persons employed therein, their remuneration, expenses, allowances, holidays, hours of work, part-time and other working arrangements, retirement and redundancy, the re-instatement and re-employment of persons in the Service, the re-deployment of staff within the Service and the conditions of service of all persons employed in the Service;

(b)	 for the controlling of the conduct of the service; 

(c) ………

(d) ………”
 
18.	It is common ground that a publication known as the Civil Service Management Code (hereinafter referred to as “the Code”) was issued under the authority of paragraph 10 set out above. It is necessary to quote from the introduction to the Code. 

“2. 	This Code …….. sets out regulations and instructions to departments and agencies regarding the terms and conditions of service of civil servants and the delegations which have been made by the Minister for the Civil Service ……. together with conditions attaching to those delegations. ……. Where departments and agencies are given discretion to determine terms and conditions, the code sets out the rules and principles which must be adhered to in the exercise of those discretions. It does not of itself set out terms and conditions of service.

3. 	Ministers and office holders in charge of Departments ……….. have been given the authority: 
(a) ……….

(b) 	to determine the number and grading of posts outside the Senior Civil Service in their respective departments and the terms and conditions of employment of Home civil servants in so far as they relate to the following:
(i)…….

(ii) remuneration, with the exception of the Senior Civil Service;

(iii) – (viii) ………

(ix) redundancy;

4. 	This delegation, which revokes all previous delegations, is made subject to the condition that recipients of delegations comply with the provisions of this Code as amended from time to time……”
    
19.	Section 11 of the Code (or at least the parts put before me) deals with termination of employment. Section 11.4 deals with dismissal on the ground of inefficiency and Sections 11.8 to 11.10 deal with termination on grounds which are not germane to the present dispute. The relevant parts of Sections 11.5 to 11.7 are as follows: - 

“11.5	 Early Retirement or Severance 
11.5.1 	Staff can retire or be retired early under the following categories: 
…….
- Compulsory Early Retirement or Severance; 
- Flexible Early Retirement or Severance
- Approved Early Retirement; 
- Actuarially Reduced Retirement; and
- Medical Retirement.
Early retirement applies to staff aged 50 or over, whereas early severance applies to staff aged under 50……….

Benefits Payable on Early Retirement or Severance

11.5.3 Full details of the benefits payable under the various categories may be found in the Civil Service Compensation Scheme (CSCS) and the Rules of the Principal Civil Service Pension Scheme (PCSPS) as appropriate.

11.6. 	Compulsory Early Retirement or Severance
11.6.1 The definition of redundancy is set out in section 139 of the Employment Rights Act 1996. Departments and agencies have authority to determine the redundancy procedures which applied to their staff, subject to the following conditions. 
Conditions
11.6.2	Departments and agencies must:
a. act consistently with the statutory provisions relating to redundancy, apart from those relating to compensation (which is provided for in the Civil Service Compensation Scheme);
b. have regard to good industrial relations practice and take into account the guidance available in the ACAS booklet (redundancy handling) …….. and
c.) consider all measures which might avoid or minimise the need for compulsory redundancy.

Voluntary Redundancy
11.6.3 As a pre-redundancy measure Departments and agencies may call for volunteers to leave on compulsory terms in order to avoid the compulsory redundancy procedures.

Structure
11.6.4 Departments and agencies may retire staff early on grounds of structure. This denotes severe management problems, for example caused by serious promotion blockages or other situations causing serious managerial or organisational difficulties which impair the efficient working of the Department. Compulsory Early Retirement or Severance on grounds of structure applies principally to members of the Senior Civil Service ……..

Limited Efficiency
11.6.5	Departments and agencies may retire staff early on grounds of limited efficiency where performance is deemed to fall within the definition in section 6.3, this has been reflected on at least two occasions in the normal reporting cycle, and no improvement is likely. Compulsory retirement of staff on grounds of limited efficiency applies principally to members of the Senior Civil Service………

11.7	Flexible Early Retirement or Severance
11.7.1	Departments and agencies may invite staff to leave in the wider interests of efficiency and effectiveness of the Civil Service. The possible grounds are:
a. Structure-to help with management problems, for example caused by promotion blockages, succession planning or organisational changes;
b. ……….
c. ………..”

20.	Section 1 Superannuation Act 1972 authorises the relevant minister to make, maintain and administer schemes whereby provision is made in respect to pensions, allowances or gratuities payable to those civil servants to whom the section applies. The Civil Service Compensation Scheme (“the Scheme”) was published under the authority of that section. It is this Scheme, as I understand it, which provides the amounts which are payable under either “C” terms or “F” terms. “C” terms are dealt with in section 2 and section 2.1, in particular, is of relevance to the arguments before me. It reads:- 

“A civil servant who is compulsorily retired early on grounds of structure or limited efficiency, or retired early on grounds of redundancy, will receive the benefits as described in rules 2.2 to 2.9.”

As I understand it the benefits described in rules 2.2 to 2.9 are the “C” terms.
 
21.	The other statutory provision which is of relevance is section 139 Employment Rights Act 1996. That section contains a definition of redundancy. It is to be noted, of course, that the definition is in the context of a dismissal on the grounds of redundancy. The section reads:-

“(1) For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to – 
(a) the fact that his employer has ceased or intends to cease – 
(i) to carry on the business for the purposes of which the employee was employed by him, or 
(ii) to carry out that business in the place where the employee was so employed, or
(b) the fact that the requirements of that business – 
(i) for employees to carry out work of a particular kind, or 
(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer, 
have ceased or diminished or are expected to cease or diminish.”

	DISCUSSION

22.	Mr Millar QC submits that following the publication of Streamlining and PACE and, in any event, by the time that ERS (2008) was published a situation existed in which there was at least the distinct possibility that employees of the Defendant would be dismissed on the grounds of redundancy. That being so the Defendant was obliged to consider all measures which might avoid or minimise the need for such dismissals. (see 11.6.2. c. of the Code). One such measure open to the Defendant was to call for volunteers to leave on “C” terms (see 11.6.3). Mr Millar QC submits, however, that it was not open to the Defendant to offer early retirement or severance on “F” terms. He submits that “F” terms can be offered only if section 11.7 of the Code is satisfied. I have set out the salient parts above. Essentially, submits Mr Millar QC, section 11.7.1. a. is not intended to apply to a situation in which a Department has reached a conclusion that it needs to shed large numbers of jobs. He points to the phrase “may invite staff to leave” and compares that with the phrase “may call for volunteers” in section 11.6.3. He submits that what the Defendant has done in this case can properly be categorised as calling for volunteers whereas it is a misuse of language to suggest that the Defendant has invited staff to leave. He submits that the phrase “invites staff to leave” is intended to encompass a situation where the Defendant targets one or more specified employees and should not be read to mean that the Defendant is empowered to issue a general invitation to unspecified staff.
 
23.	Further, Mr. Millar QC submits that the reality of the factual situation in this case is that the Defendant is engaged in a process of cutting a large number of jobs. True it is that following those cuts there will be organisational changes but, submits Mr Millar QC, it is not correct to say that the Defendant is engaged in a process which comes naturally within the meaning 11.7.1 a.

24.	On the basis that these submissions are well founded, Mr Millar QC concludes by submitting that the Code contains no express provision which authorises the Defendant to offer “F” terms in the circumstances which prevail and, accordingly, its offer to that effect is unlawful. 
 
25.	Mr Millar QC derives some support for his submissions from a document which was published in 1987. I refer to a document entitled “General Circular GC2/77”. This Circular, as I understand it, was published to civil servants to explain arrangements which would prevail from March 1987 in relation to early retirement and early severance before minimum retirement age. It is to be observed, of course, that this Circular pre-dates the existence of a Code. Nonetheless Mr Millar QC submits, and I have no reason to doubt, that the provisions which the Circular sought to explain were in similar terms to the provisions now under consideration in the Code. He points in particular to paragraphs 10 and 14 to 20 of the Circular. Not surprisingly, he lays particular emphasis upon paragraph 15 which is in the following terms:

“Flexible early retirement
15. Purpose To enable management to invite specific individuals to leave the civil service in the interest of the efficiency and effectiveness of the service. It does not provide an alternative to the redundancy arrangements. Where a staff surplus occurs as a straight result of a contraction in departmental numbers, it will still be necessary for this to be dealt with under the provision of the model redundancy agreement or a departmental version of it.”

To repeat this Circular was issued many years before the Code came into existence. On the basis that it was explaining a provision in very similar terms, however, it seems to me that it can be used as one of the tools for interpreting the provisions of the Code. That being so, in my judgment it is a pointer towards the interpretation of the Code for which Mr Millar QC contends. That said, it cannot of itself conclusively determine the meaning to be given to the relevant provisions of the Code. Mr. Millar QC does not suggest otherwise.
 
26.	In the consultative document which preceded the publication of ERS (2008) the suggestion was made that a redundancy situation did not then exist. (see paragraph 11 above). In my judgment, in the strict sense, that is correct. Redundancy is a reason which justifies dismissal. At the time of publication of the consultation paper no employee was about to be dismissed on grounds of redundancy and, as I understand it, that is true at the present time. However, in my judgment it would be wrong to say, if the same is being said, that no pre-redundancy situation then existed or now exists. It is clear beyond any shadow of doubt that a large number of jobs are to be shed and that at least one of the aims of the current process is aimed at avoiding the need for declaring compulsory redundancies. I have little doubt, therefore, that insofar as ERS (2008) calls for volunteers to terminate their employment on “C” terms it is engaged in a process which is a “pre-redundancy” measure and, squarely, within the provisions of sections 11.6.3 of the Code. 
 
27.	The issue for my determination, therefore, becomes whether the Code, properly interpreted, precludes the Defendant from offering “F” terms when what can properly be regarded as a pre-redundancy situation exists. I put it in this way since Mr Tomlinson QC, on behalf of the Defendant, accepts that the Defendant would have acted unlawfully, if the Code, properly interpreted, precludes the offering of “F” terms in the circumstances which prevailed at the time ERS (2008) was published. 
 
28.	The primary submission made by Mr Tomlinson QC on behalf of the Defendant is that ERS (2008), insofar as it offers the possibility of retirement or severance on “F” terms is within section 11.7.1.a. properly interpreted. Mr Tomlinson QC submits that the phrase “may invite staff” should not be interpreted in the narrow way (as he submits) that Mr Millar QC suggests. He submits that the phrase is perfectly capable of being read, sensibly, so as to authorise a general invitation to large numbers of staff and he submits that the evidence as constituted by the Streamlining and PACE documentation and the witness statement of Mr Hatfield shows, clearly, that the “invitation” under section 11.7.1. a. has been made in the wider interests of efficiency and effectiveness and so as to help with organisational changes within the Department.

29.	I accept the submission made by Mr. Tomlinson QC that the terms of section 11.7 are apt to encompass a general invitation to staff to leave when the shedding of significant numbers of jobs is necessary in the wider interests of efficiency and/or when organisational changes are anticipated. In my judgment there is nothing in the language used which suggests the contrary and I do not regard the difference in the wording used in Section 11.6.3 (“call for volunteers”) to be significant. The phrase “call for volunteers” is often used in the specific context of redundancy and I consider that the draftsman of the Code was simply using a phrase which was familiar in context.

30.	I also accept the submission of Mr. Tomlinson QC that the words of the Code should be interpreted flexibly, certainly where such an approach is consistent with the object of the Code. In my judgment the object of the Code is to provide what Mr Millar QC describes as “overarching” principles. As the Code itself provides it does not of itself set out terms and conditions of service. A good example of the way in which the Code demonstrates its own flexibility is the section which deals with redundancy. Sections 11.6.1 and 11.6.2 lay down a set of principles which are to be followed when compulsory redundancies are being considered. Section 11.6.2.c. imposes upon the Defendant an obligation to consider all measures which might avoid or minimise the need for compulsory redundancy. Is it to be said that offering flexible early retirement or severance is not one such permitted measure to be considered? In my judgment that would be a very surprising conclusion.

31.	It also seems to me that a Court should be very slow to find that a Code which is not a statement of terms and conditions of employment prohibits an employer and its employees from reaching a voluntary agreement. Obviously, there is no express prohibition upon the Defendant issuing a general invitation to large numbers of employees to take flexible early retirement or severance. In those circumstances, to repeat, a Court should be slow to conclude that, nonetheless, the Code has that effect.

32.	I also accept that the evidence is clear in this case that the shedding of jobs is inextricably bound up with the efficiency of the Department and organisational changes within it. Accordingly, it seems to me that the terms of Section 11.7.1.a. are satisfied in this case.

33.	It is suggested by Mr. Millar QC that Sections 11.6.3 and 11.7.1.a. should be considered as alternatives; in the context of the Code they are mutually exclusive. 
 
34.	I accept the contrary submission of Mr Tomlinson QC that the provisions of the Code should not be treated as being mutually exclusive unless either the language of the provisions makes that clear or the underlying factual circumstances to which the provisions are said to apply cannot, sensibly, co-exist.

35.	In my judgment, there is nothing either as a matter of logic or sensible industrial relations which should lead to the conclusion that a redundancy situation or a pre-redundancy situation cannot co-exist with an intention on the part of an employer to effect improvements in efficiency and effectiveness or effect organisational changes. Quite the contrary, in my judgment, since such situations are often inextricably linked.
 
36.	In my judgment, the concepts contemplated by Section 11.6.3 and 11.7.1 a. are, as a matter of fact, inextricably linked in this case as a glance at the section headed “Aim and principles” within Streamlining amply demonstrates. In my judgment it would be wholly artificial to view the need to reduce the number of jobs wholly independently of the organisational and structural changes which are anticipated in that document. 
 
37.	I have also reached the conclusion that there is nothing in the wording of sections 11.6 and 11.7 of the Code, read in isolation or in the context of the provisions of Section 11 as a whole, which lead to the conclusion that Sections 11.6 and 11.7 are intended to be mutually exclusive.
 
38.	As will be obvious, in the light of the foregoing, I have reached the conclusion that the Defendant did not act unlawfully when it published ERS (2008). In reaching that conclusion, of course, I appreciate that I have reached a view as to the meaning of the Code which may be thought to be at odds with GC/277. As I indicated earlier, however, that publication cannot constitute an authoritative guide to the interpretation of the Code and, for what it is worth, it has not been treated by the Defendant, other Government Departments and at least some trade unions as providing such a guide in the recent past.
 
39.	I should also record that the Skeleton Arguments of Counsel and, indeed, their oral submissions contained some nuances and details which are not dealt with in this judgment. It is obviously highly desirable that this judgment be produced quickly and, in these circumstances, I have dealt with the main points only as I perceive them to be.
 
40.	I have reached the clear conclusion that this claim for judicial review must fail. I make the order consequent upon this conclusion which has been submitted to me in draft by the parties. The substantive Order that I make is that permission to apply for judicial review be granted but that the Claim be dismissed.