QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| The Queen (on the application of the
Public and Commercial Services Union)
|- and -
|Minister for the Civil Service
Ms Elisabeth Laing QC & Mr Clive Sheldon (instructed by the Treasury Solicitor) for the Defendant
Hearing dates: 22/4/10 – 23/4/10
Crown Copyright ©
Mr Justice Sales :
"2.1 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. …
Early retirement for civil servants in post on or before 31 March 1997
2.2 This rule applies where a civil servant:
(a) was in post on or before 31 March 1997;
(b) is retired early on or after 6 April 2006 under rule 2.1 above;
(c) is aged 50 or over;
(d) has five or more years' qualifying service;
(e) has not opted out of the 1972 Section; and
(f) has not opted in accordance with rule 2.4 to be treated under section 2A.
The civil servant will be eligible for a pension and lump sum payable under the [Principal Civil Service Pension Scheme] in accordance with rule 3.11 of the 1972 Section, but with reckonable service increased by 6 2/3 years and the benefits being brought into payment immediately. … If the civil servant's pension under rule 3.11 of the 1972 Section would have been higher if rule 1.6b of the 1972 Section were disregarded the civil servant will also be eligible for a lump sum compensation payment under rule 2.3a. …"
The legal background to the Superannuation Act 1972
"Provided always, and be it further enacted, that nothing in this Act contained shall extend or be construed to extend to give any person an absolute right to compensation for past services, or to any superannuation or retiring allowance under this Act, or to deprive the Commissioners of His Majesty's Treasury, and the heads or principal officers of the respective departments, of their power and authority to dismiss any person from the public service without compensation."
This provision remained unrepealed in later Superannuation Acts and was consolidated in the Superannuation Act 1965 ("the 1965 Act") in section 79 of that Act, set out below.
"My Lords, there is, first, the question of how the matter stands upon the statutes. The learned counsel had to admit that in quite the early days there obviously was no actual right in a servant of the King to have a pension, and he really pinned his faith to the Act of 1859 and the second section of it. It is impossible, of course, in that section to find positive words which direct that a pension must be granted; the phrase is: "Subject to the exceptions, the Superannuation Allowance to be granted after the commencement of this Act to persons who shall have served shall be," so-and-so. All through the Acts that follow there is a frequent use of the word "entitled", but "entitled", I take it, shows no more than entitled to such as the Acts give him. I cannot do better there than quote the phrase which Lord Buckmaster used in Considine v. McInerney, where, summing up the position, he says: "He was entitled to expect an annual allowance," and then he goes on, in the well known words that have been so often quoted, to say: "This expectation, though it might be relied on with full certainty, was none the less not a legal right, and no claim for it could be enforced by any legal proceedings." But the difficulty under that Act and the following Acts does not end there, because, in the first place, there is s. 30 of the Act of 1834, which was specially exempted from the repeal which was made of all other sections, and has to be read with all the Acts up to the present date. The only argument that was presented upon that was that s. 30 of the Act of 1834 says there is to be no absolute right. My Lords, to get out of a provision that you are not to have an absolute right a positive provision that you are to have a right, is an argument which has only to be stated to be rejected. …"
"Why, it is asked, should this change of language occur in s. 2, and what was the necessity for this express power conferred by s. 9, if the Legislature intended the grant and the amount of the pension to be a matter of grace and not of right? I think that the explanation is as follows: The Commissioners of the Treasury in the exercise of the powers conferred upon them by the 1834 Act were, I strongly suspect, in the habit of always granting the maximum pensions allowable. When, therefore, the Legislature was passing the amending Act of 1859 for the purpose of apparently further defining the powers of the Commissioners, it might quite intelligibly have done so in the language employed in the Act, without intending to confer upon the civil servants a legal right to have the pensions awarded to them. It would, on the other hand, be very surprising if the Legislature when conferring such a right for the first time should have made so great a change in the law by such vague and ambiguous language. …"
This is of some relevance to the arguments raised by the Claimant before me.
"Nothing in this Act shall extend or be construed to extend to give any person an absolute right to any allowance or gratuity under Part I or Part II of this Act or to deprive the Treasury or the head or principal officer of any department of their or his power and authority to dismiss any person from the public service without compensation."
"Entitlement to benefit
91. Hitherto, Civil Service pension benefits have always been discretionary. Section 79 of the Superannuation Act 1965 states that nothing in the Act shall be construed as giving any civil servant an absolute right to benefit. The Government are satisfied that they have never abused this power of discretion; nevertheless, the Committee feel that it is wrong that there should be such a power and that there is no good reason why civil servants should not have a legal entitlement to their pensions. In all the other public service schemes (except the armed forces), and in the great majority of private schemes, there is a legal right to benefit.
92. The Superannuation Bill is so framed as to make it possible for the new administrative scheme to specify benefits as mandatory. In the new scheme, there will be a right to benefits where this is to the advantage of the civil servant. This includes the main pension and lump sum, and widows' and dependants' pensions. But for tax reasons the following benefits will continue to be discretionary:
(i) the death gratuity and supplementary death gratuity;
(ii) the short service gratuity, unestablished gratuity and marriage gratuity;
(iii) all injury benefit payments;
(iv) all compensation (as opposed to pension) payments in the premature retirement terms.
Otherwise there will be an enforceable legal entitlement to the benefits of the scheme, except in the rare cases where the forfeiture rules may apply.
93. The Committee agree that with the introduction of preservation, and the new role envisaged for pensions nationally, it would be inappropriate to continue the rules whereby Civil Service pensions can be forfeited or reduced in cases of misconduct and other circumstances. In particular, there will be no question in the future of dismissal from the Service automatically leading to forfeiture of pension rights. However, the Committee agree that there is a narrowly-defined range of circumstances in which pensions should be forfeited or withheld:
(i) Pensions will be automatically forfeited under the Forfeiture Act 1870 if the pensioner is convicted of treason (which normally happens only in wartime).
(ii) If a pensioner goes bankrupt, there will continue to be provision (under the Bankruptcy Acts) for the pension to be paid over in discharge of his liabilities.
(iii) Under Clause 5 of the Superannuation Bill, the pensioner will forfeit his pension if he assigns or tries to assign it.
(iv) Departments will have a limited power to impose a lien on pension benefits in respect of sums misappropriated or owed to them by the employee. That is, the Department will be able to reduce the pension or deferred pension by the actuarially appropriate amount if the pensioner is unwilling to repay the amount out of his own resources. If the pensioner disputes the liability, the Department will not be able to exercise the lien without first obtaining an order or judgment from a competent Court specifying the sum due.
94. In the vast majority of misconduct cases, forfeiture will not apply. But the Committee accept that the Government will reserve the right to impose forfeiture on the pensions of those guilty of particularly serious misconduct against the State e.g. a major security offence. But it should be emphasised that these cases will be extremely rare, and that when they occur two safeguards will apply. Firstly, the circumstances of each case will be discussed on a 'without prejudice' basis between the Staff and Official Sides before a decision is taken. Secondly, all staff will have a right to appeal to the Appeal Board (which is being set up in connection with the premature retirement arrangements) against a decision that a pension should be forfeited for misconduct. Moreover, the Department will accept the Appeal Board's judgment in such cases. This right of appeal will be available to those who have already left the Service when they forfeit their pensions, as well as to those who are still in service.
95. These forfeiture rules are necessarily subject to the provisions of the proposed national legislation on preservation of pension rights and on the conditions for exemption from the State Reserve Scheme. They will apply equally to deferred and full-term pensions."
"12. The Staff Side have welcomed the Superannuation Bill, given the safeguards it contains. Firstly, the Bill lays a statutory obligation on the Minister for the Civil Service to consult staff interests before making changes. Secondly, there is a provision preventing him from worsening pensions in payment or pension rights already accrued unless the staff interests agree to it. Thirdly, the Bill allows the scheme to give a legal entitlement to pensions rather than to continue on the discretionary basis laid down in the Superannuation Acts. …"
In my view, the reference to a legal entitlement to pensions as the third protection refers generally to all cases when pensions were to be payable under the new scheme, including cases of compulsory early retirement. That is also the natural inference to be drawn from paragraphs 91 and 92 of the report.
"(1) The Minister for the Civil Service (in this Act referred to as "the Minister")-
(a) may make, maintain, and administer schemes (whether contributory or not) whereby provision is made with respect to the pensions, allowances or gratuities which, subject to the fulfilment of such requirements and conditions as may be prescribed by the scheme, are to be paid, or may be paid, by the Minister to or in respect of such of the persons to whom this section applies as he may determine;
(b) may, in relation to such persons as any such scheme may provide, pay or receive transfer values;
(c) may make, in such circumstances as any such scheme may provide, payments by way of a return of contributions, with or without interest; and
(d) may make such payments as he thinks fit towards the provision, otherwise than by virtue of such a scheme of superannuation benefits for or in respect of such of the persons to whom this section applies as he may determine. …
(3) Before making any scheme under this section the Minister, or, if the Minister so directs in relation to a particular scheme, another Minister of the Crown specified in the direction, shall consult with persons appearing to the Minister or that other Minister, as the case may be, to represent persons likely to be affected by the proposed scheme or with the last-mentioned persons.
(4) This section applies to persons serving –
(a) in employment in the civil service of the State; or
(b) in employment of any of the kinds listed in Schedule 1 to this Act; or
(c) in an office so listed.
(5) Subject to subsection (6) below, the Minister may by order-
(a) add any employment to those listed in the said Schedule 1, being employment by a body or in an institution specified in the order,
(b) add any office so specified to the offices so listed, or
(c) remove any employment or office from the employments or offices so listed.
(6) No employment or office shall be added to those listed in the said Schedule 1 unless the remuneration of persons serving in that employment or office is paid out of moneys provided by Parliament or the Consolidated Fund.
(7) Notwithstanding subsection (6) above, the Minister may by order provide that this section shall apply to persons serving in employment which is remunerated out of a fund specified in the order, being a fund established by or under an Act of Parliament. …"
(2) Any scheme under the said section 1 may make provision for the payment by the Minister of pensions, allowances or gratuities by way of compensation to or in respect of persons –
(a) to whom that section applies; and
(b) who suffer loss of office or employment, or loss or diminution of emoluments, in such circumstances, or by reason of the happening of such an event, as may be prescribed by the scheme.
(3) No scheme under the said section 1 shall make any provision which would have the effect of reducing the amount of any pension, allowance or gratuity, in so far as that amount is calculated by reference to service rendered before the coming into operation of the scheme, or of reducing the length of any service so rendered, unless the persons consulted in accordance with section 1(3) of this Act have agreed to the inclusion of that provision.
(4) Subject to subsection (3) above, any scheme under the said section 1, or any provision thereof, may be framed –
(a) so as to have effect as from a date earlier than the date on which the scheme is made; or
(b) so as to apply in relation to the pensions, allowances or gratuities paid or payable to or in respect of persons who, having been persons to whom the said section 1 applies, have died or ceased to be persons to whom that section applies before the scheme comes into operation; or
(c) so as to require or authorise the payment of pensions, allowances or gratuities to or in respect of such persons. …
(9) Any scheme under the said section 1 may amend or revoke any previous scheme made thereunder.
(10) Different schemes may be made under the said section 1 in relation to different classes of persons to whom that section applies, and in this section "the principal civil service pension scheme" means the principal scheme so made relating to persons serving in employment in the home civil service or the diplomatic service.
(11) Before a scheme made under the said section 1, being the principal civil service pension scheme or a scheme amending or revoking that scheme, comes into operation the Minister shall lay a copy of the scheme before Parliament.
(12) Notwithstanding any repeal made by this Act, the existing civil service superannuation provisions, that is to say, the enactments and instruments listed in Schedule 2 to this Act, shall, with the necessary adaptations and modifications, have effect as from the commencement of this Act as if they constituted a scheme made under the said section 1 in relation to the persons to whom that section applies, being the principal civil service pension scheme, and coming into operation on the said commencement and may be revoked or amended accordingly."
Development of the legal framework from 1972 and the interpretation of section 2(3) of the 1972 Act as amended
"No scheme under the said section 1 shall make any provision which would have the effect of reducing the amount of any pension, allowance or gratuity, in so far as that amount is directly or indirectly referable to rights which have accrued (whether by virtue of service rendered, contributions paid or any other thing done) before the coming into operation of the scheme, unless the persons consulted in accordance with section 1(3) of this Act have agreed to the inclusion of that provision."
i) Under the PCSPS as it stood in 1990, entitlements to pension payments and to other lump sum payments were closely bound up together, were expected to be paid in each case as of course, and there was no apparent reason for treating them differently in terms of protection under section 2(3). The reason given in the Joint Committee report and subsequently for continuing to treat some benefits as discretionary was to secure tax advantages for employees, which reason did not suggest that there should be any lesser protection in respect of such benefits than in respect of pension payments so far as concerns the operation of section 2(3);
ii) It appears from examination of the terms of the 1990 Act and the other amendments it introduced into the 1972 Act (see e.g. section 1(2A), referring to money purchase schemes) that the intention of Parliament in the 1990 Act was simply to make amendments to the 1972 Act to accommodate money purchase schemes and not to remove or cut down substantive protective rights conferred by the 1972 Act as originally enacted, in particular in section 2(3). If the intention had been to remove or cut down the protection for individuals afforded by section 2(3) as originally enacted, I think that much clearer language would have been used; and
iii) The Minister who introduced the 1990 amendment in Parliament made statements on the second reading of the Bill in 1990 (see Hansard, HC Deb., 8 January 1990, vol. 164 cols. 709-727) which made clear that there was nothing "in this largely technical and tidying up Bill that needs to be controversial…" and that the Bill made only "minor changes to the legislative framework for public service pensions" including "minor consequential amendments occasioned by the wider scope for making additional voluntary contributions introduced following the Social Security Act 1986" and did "not make major amendments to the existing law". In relation to the clause containing the amendment to section 2(3) of the 1972 Act, he said: "[it] brings money purchase pension schemes for civil servants within the scope of the existing arrangements for agreeing amendments to civil service pension schemes that may adversely affect the accrued rights of scheme members or pensioners". In my view, these statements constitute statements in Parliament by the promoter of the Bill of the requisite clarity to provide a good indication of the object or mischief at which a provision was aimed, to which it is legitimate and appropriate to have regard when interpreting the legislation in question. The statements clearly show that it was no part of the purpose for the amendment to cut down existing protective rights as already set out in section 2(3), but rather was to extend that existing protection to cover rights of the relevant kind which had been acquired by making additional voluntary contributions as well as by length of service.
Application of section 2(3) of the 1972 Act in relation to the CSCS
"Compensation payments for early retirement or severance under sections 2 to 8 of this scheme and for personal injury under section 10 of this scheme will be paid at the discretion of the Minister, and nothing in this scheme will extend or be construed to extend to give any person an absolute right to them."
But, as with the PCSPS before the changes in 1994, other provisions in the CSCS (including in sections 2 to 8 and section 10) are expressed in terms of entitlement: see e.g. rule 2.1 set out above.