England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		18/06/2010

Mr Justice Sales :

1. This judgment supplements my judgment in this case handed down on 10 May 2010: [2010] EWHC 1027 (Admin) ("the main judgment"). I refer to the main judgment, and in this judgment I use the same terms which are defined there.
2. In paragraph [60] of the main judgment I indicated that consideration should be given to the terms of the quashing order and the extent of the effect of that judgment, and said that the parties could refer any outstanding area of dispute back to the court for determination. The parties have identified areas of dispute and so have returned to court for a further hearing for those areas to be resolved.
3. The areas of dispute arise under two headings. First, the parties disagree about the scope of protection afforded by section 2(3) of the 1972 Act (as amended, which is set out in paragraph [49] of the main judgment). Secondly, the parties disagree about whether the whole of the amended CSCS should be quashed or whether parts of it may be saved.

(1) The scope of protection under section 2(3)

4. The dispute in relation to this heading relates to three matters:

i) Miss Laing QC for the Minister submits that the protection afforded by section 2(3) does not extend to benefits which may become payable under the CSCS in cases where a civil servant, by agreement with his employer, takes voluntary redundancy or voluntary early retirement. On her submission there is an important distinction to be drawn for the purposes of application of section 2(3) between cases of compulsory removal from service (compulsory redundancy, compulsory early retirement - as covered, in particular, by sections 2 and 2A of the CSCS - etc.: "compulsory severance") and cases of voluntary withdrawal from service (voluntary redundancy, voluntary early retirement - as covered, for example, by sections 3 and 3A of the CSCS - etc.: "voluntary severance"). In cases of voluntary severance the employee has no right to insist on being removed from service, but requires the agreement of the employing department - termination of employment is effected by agreement in such cases rather than by dismissal. Moreover, the employing department has an option under the CSCS to choose to offer terms for voluntary severance selected from a menu comprising terms equivalent to compulsory severance terms (sections 2 and 2A), flexible terms (sections 3 and 3A) or, in certain cases, other approved terms (section 4). Since such decisions are required to be made by the employer, Ms Laing says the civil servant in such cases has no right take the benefits set out in the relevant parts of the CSCS. However, in each case the content of the proposal which may be made to a civil servant to encourage voluntary severance is defined by the CSCS. In cases of voluntary severance it is for the employing department to decide which set of terms to offer from this menu of options, but it has no discretion to depart from this menu of options when it wishes to promote termination of employment by voluntary severance and once the termination of employment is effected the civil servant becomes entitled to receive the relevant benefits defined in the CSCS. A significant change to be introduced in the amended CSCS is to release employing departments from being bound to choose from this limited menu of options when seeking voluntary severance of employment, so as to allow them a much greater degree of flexibility in deciding what terms to offer. Terms which the amended CSCS would allow an employing department to offer on voluntary severance may be less advantageous to civil servants than the menu of options available on voluntary severance under the CSCS in its unamended form. The Minister submits that the benefits available under the CSCS in relation to voluntary severance are not protected by section 2(3) of the 1972 Act. The Claimant submits that they are;

ii) Under the terms of the CSCS, in relation to both compulsory severance and voluntary severance, there are circumstances where the benefits payable on severance include payment of benefits to reflect an additional notional 6? years of reckonable service ("the additional period") to be added to the reckonable service actually rendered by the civil servant. An example is given by section 2.2 of the CSCS, set out at paragraph [6] of the main judgment (the additional period is also relevant to benefits set out in other sections of the CSCS, such as section 2A). The additional period in section 2.2 only operates so as to enhance the benefits upon termination of employment where the conditions set out in the sub-paragraphs of section 2.2 are satisfied, including the requirement at sub-paragraph (d) that the civil servant in question "has five or more years' qualifying service". Also, the availability of enhanced benefits by reference to the additional period is governed by section 2.2.2 of the CSCS, which provides that "reckonable service may not be increased by more than its length…". In other words, the additional period (a) is only available once a civil servant has completed five years of service and (b) is only available to an extent to match the amount of reckonable service actually performed by the civil servant until he has rendered 6? years of actual service (from which point enhanced benefits reflecting the full additional period will be available for him). Accordingly, once the conditions in section 2.2 are satisfied the civil servant will be entitled to an additional period of 5 years and the additional period will increase day by day in line with his continued actual service until he has completed 6? years of actual service, from which point his actual service will have no further effect on the additional period applicable in his case. Because section 2 of the CSCS applies to civil servants in post on or before 31 March 1997, when the amended CSCS was introduced all the civil servants in the category to which section 2 applies had already completed 6? years' actual service and so were not in a position where their additional periods were subject to any possible further increase. As concerns civil servants covered by the terms of section 2A of the CSCS, however, that is not the case – there is a group of civil servants in this category who have completed more than five but less than 6? years' service and whose additional periods are therefore still increasing day by day in line with their actual service. The Minister submits that the enhanced benefits associated with the additional period are not protected by section 2(3) of the 1972 Act. The Claimant submits that they are;

iii) Under the terms of the CSCS, again in relation to both compulsory severance and voluntary severance, there are circumstances where the benefits payable on severance include payment of a lump sum. An example of such a provision is section 2.3 of the CSCS, which provides that, subject to certain conditions, "a civil servant may also be paid a lump sum compensation payment of six months' pensionable earnings…". It is common ground that this benefit is only available once a civil servant has completed five years' service (i.e. condition (a) referred to in sub-paragraph (ii) above also governs the availability of this benefit). Apart from this, the amount of the lump sum payment is not subject to variation according to the period of actual service rendered by the civil servant. When the amended CSCS was introduced, every civil servant covered by section 2 of the CSCS had already rendered sufficient service to be entitled to receive this benefit. That will also be true for many civil servants covered by other sections of the CSCS, but there will be some who have still not yet completed five years' service so as to become eligible to receive this benefit. The Minister submits that the lump sum payment benefits are not protected by section 2(3) of the 1972 Act. The Claimant submits that they are.

I consider these areas of dispute in turn.

(i) Benefits available in cases of voluntary severance

5. In my judgment, relevant benefits available under the CSCS in respect of voluntary severance are protected by section 2(3) of the 1972 Act in the same way as the similar benefits available in respect of compulsory severance are protected. In my view, it is nothing to the point that a civil servant has no right to insist on voluntary severance and that in voluntary severance cases the employing department has an option which particular set of benefits to offer the civil servant. There is nothing in the text of section 2(3) which suggests that the protection it affords is affected in any way by such matters.
6. According to its terms, that provision focuses on changes to the CSCS "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 changes were introduced. The terms available under the CSCS in relation to voluntary severance define the amount of pensions, allowances and gratuities which will be paid once the voluntary severance takes place, and do so in ways which are directly or indirectly referable to rights which have accrued by virtue of service rendered or contributions paid by the relevant civil servant. Accordingly, in my view, those terms fall squarely within the scope of section 2(3).
7. The changes in the amended CSCS would have the effect of reducing the amount of such pensions, allowances or gratuities payable in such cases, and so, by virtue of section 2(3), cannot be introduced unless the trade unions consulted under section 1(3) of the 1972 Act have agreed to the changes.
8. The important point to note is that section 2(3) focuses on the nexus between the rights accrued and the amount of any pension, allowance or gratuity. It does not refer to the mechanism by which such pension, allowance or gratuity comes to be payable. Therefore, it makes no difference whether such pension, allowance or gratuity comes to be payable because a civil servant has been made subject to compulsory severance or leaves employment on the basis of voluntary severance. In both cases a pension, allowance or gratuity will be payable in amounts referable to the civil servant's accrued rights as defined in the CSCS.
9. The force of this point is emphasised by the fact that, as Mr Giffin QC submitted for the Claimant, the argument for the Minister – in seeking to suggest that the fact that a civil servant had no right to insist on voluntary severance meant that he had no relevant accrued rights for the purposes of section 2(3) – proves too much. A civil servant equally has no right to be made subject to compulsory severance, but it is common ground in the argument at this stage that the benefits payable in a case of compulsory severance (where the amount of the benefits is referable to length of service or contributions made) are protected by section 2(3). No valid distinction between cases of compulsory severance and voluntary severance can be drawn on the basis that the employing department has to make choices in the latter case, since it equally has to make a choice in the former case before the civil servant becomes entitled to receive anything.
10. The protection in section 2(3) is directed to the benefits a civil servant is entitled to receive under the CSCS once relevant decisions have been taken by his employing department (whether to choose him for compulsory severance or whether to offer him voluntary severance on terms taken from one of the menu of options permitted by the CSCS); it is not affected by the mechanism prior to that stage which gives rise to the situation in which a pension, allowance or gratuity comes to be payable in his case.
11. My conclusion in this regard is also supported by consideration of the underlying purpose of section 2(3). The basic objective of that provision is that where a civil servant has accrued rights to receive benefits under the CSCS by virtue of rendering loyal service to the Crown (or paying contributions), protection should be afforded for those accrued rights. The way in which the CSCS operates in respect of benefits to be paid in cases of voluntary severance involves treating civil servants as having accrued rights in respect of the benefits to be received, by virtue of service rendered or contributions made by them. As with the case of benefits payable in cases of compulsory severance, civil servants are entitled to expect that those accrued rights should also be protected in cases of voluntary severance under the CSCS.

(ii) Protection in respect of the additional period

12. In my judgment, the amount of a pension which becomes payable at an enhanced rate by reference to the additional period according to the terms of the CSCS is also covered by the protection in section 2(3) of the 1972 Act. I consider that this result is given by a straightforward reading of section 2(3) in relation to each of conditions (a) and (b) referred to in paragraph [4(ii)] above.
13. I first refer to condition (a) (the additional period is only available after five years' service). The right to have an additional period brought into account is a right which accrues "by virtue of service rendered" – i.e. by reason of the fact that the civil servant has rendered five years' service. The amount of any pension payable upon severance is increased by reference to that additional period and hence is "directly or indirectly referable" to such right. In relation to condition (a) it does not matter, in my view, that the amount of the enhancement of pension from the additional period does not itself directly correlate or change with any ongoing period of service. There is nothing in the text of section 2(3) which says that the protection it contains depends upon there being any such direct correlation, and the use of the word "indirectly" indicates strongly that it does not.
14. Moreover, it is difficult to see any policy justification for distinguishing between protecting other accrued rights of civil servants and affording protection in relation to the accrued rights associated with the additional period earned by a civil servant who renders a significant period of loyal service to the Crown.
15. I also dismiss the suggestion by Ms Laing QC that the fact that all civil servants covered by section 2 of the CSCS and many other civil servants had already completed the relevant qualifying period of five years' service at the time the amended CSCS was introduced is relevant to the analysis under section 2(3). In my view it is not. On the plain language of section 2(3), those civil servants who have already completed five years' service have "rights which have accrued" in the requisite sense, and their accrued rights fall to be protected under section 2(3). The policy underlying section 2(3), to protect accrued rights earned by rendering loyal service to the Crown, supports that conclusion.
16. In my view, therefore, the fact that the additional period is only available once five years' service has been rendered (condition (a) in paragraph [4(ii)] above) is sufficient by itself to bring the benefits associated with it within the protection of section 2(3).
17. The fact that at a certain stage (i.e. when the civil servant has completed more than five years' and less than 6? years' service: "the intermediate stage") there is a direct correlation between the length of the additional period and the length of the service actually rendered by the civil servant (condition (b) at paragraph [4(ii)] above) serves to reinforce that conclusion, but is not essential to justify it. This feature of the rules governing enhancement of benefits by reference to an additional period serves to emphasise the degree of connection which exists between the benefits to be received and the service rendered, and hence serves to emphasise that the relevant rights have indeed accrued "by virtue of service rendered". It also serves to reinforce the inference that on any reasonable interpretation of section 2(3) the enhanced benefits in respect of the additional period fall within the protection afforded by that provision, since it would be absurd for civil servants in the intermediate stage to be protected under section 2(3) in respect of such benefits but then suddenly to lose such protection as soon as they had completed 6? years' service, when they have earned the full additional period available to them (i.e. at the point when one would have thought that they had the fullest extent of accrued rights deserving of protection).

(iii) The lump sum

18. In my judgment, the lump sum payment benefit under section 2.3 of the CSCS and equivalent provisions is also covered by section 2(3) of the 1972 Act. The reasoning at paragraphs [13]-[16] above applies equally in relation to this.

(2) Does the whole amended CSCS fall to be quashed?

19. Quite apart from the arguments regarding the extent to which aspects of the amended CSCS were affected by illegality by reason of a failure to comply with section 2(3) of the 1972 Act as set out above, the Claimant submits that the whole of the amended CSCS falls to be quashed by reason of the main judgment. This is because, even if there are some changes to the CSCS contained in the amended CSCS which do not fall within the scope of the protection afforded by section 2(3), it is said that those parts of the amended CSCS cannot properly be severed from those parts of the amended CSCS which are affected by illegality by reason of non-compliance with section 2(3), with the result that the whole of the amended CSCS falls to be quashed.
20. Against this, Ms Laing submitted that the individual amendments to the CSCS introduced by the amended CSCS could be separated out from each other and those provisions not affected by illegality under section 2(3) could and should be severed from the affected parts of the amended CSCS and saved from being quashed.
21. The changes introduced by the amended CSCS addressed three areas: changes to benefits available in cases of compulsory severance, changes to benefits available in cases of voluntary severance and certain changes to deal with problems which had been identified in terms of compatibility of the CSCS with age discrimination legislation. Ms Laing's plea that parts of the amended CSCS should be severed and saved from being struck down had particular significance if - in line with her submissions as to the limits of the effect of section 2(3) and the main judgment considered above - the parts of the amended CSCS dealing with benefits in cases of voluntary severance, the additional period and lump sum payments were not directly affected by illegality arising from non-compliance with section 2(3) of the 1972 Act. Contrary to her submissions in that regard, however, I have reached the conclusion that they are so affected, so the argument regarding the severability of those provisions becomes academic.
22. It remains for me to decide whether the parts of the amended CSCS dealing with the age discrimination issue should be severed from the parts of the amended CSCS dealing with compulsory severance and voluntary severance. In argument before me the parties did not focus on this precise question in any detail, since they were more interested in the question of whether the voluntary severance provisions could be saved from being quashed if they were not affected by section 2(3), whereas I have concluded that they are so affected.
23. The relevant principles to be applied are those set out by Lord Bridge in DPP v Hutchinson [1990] 2AC 783 at 804B-G. As I understood the parties' submissions, it was common ground that in the relevant instrument - namely the scheme which contains the amendments to create the amended CSCS ("the Scheme") - the age discrimination amendments are textually distinct from the other provisions in that instrument making amendments in respect of compulsory severance and voluntary severance (together "the unlawful amendments"); accordingly, the unlawful amendments could be struck through by application of the "blue pencil" test leaving the age discrimination amendments in place. In other words, what Lord Bridge calls "textual severability" is possible in relation to the age discrimination amendments in the Scheme.
24. The principal issue, therefore, is whether what Lord Bridge calls "substantial severability" is also possible. Were the age discrimination amendments intended to enact "free-standing provisions which were intended to operate and are capable of operating independently of the offending clause[s]" (adapting the words of Lord Bridge at [1990] 2 AC 804D)?
25. The age discrimination amendments are contained in Schedules 3 and 4 to the Scheme. Schedule 3 is to have effect from 16 July 2008 and Schedule 4 is to have effect from 1 April 2009, whereas the remainder of the Scheme is to come into operation only on 1 April 2010. Schedules 3 and 4 were therefore intended to amend the CSCS in a way completely distinct from the operation of the other amendments contained in the Scheme. The operation of Schedules 3 and 4 is not dependent upon those other amendments being in place.
26. The rationale of the age discrimination amendments is also completely distinct from the rationale for the unlawful amendments (which was to introduce flexibility in relation to benefits payable upon, and to diminish rights available in respect of, compulsory severance and voluntary severance). By contrast with the rationale for the unlawful amendments, Schedules 3 and 4 are directed to rectifying what might otherwise be a distinct area of unlawfulness in the existing CSCS in terms of its compatibility with age discrimination legislation.
27. In addition, the Claimant, in correspondence in the course of consultation upon the terms of the Scheme and in Mr Giffin's submissions, indicated that it has no significant objection in principle to the age discrimination amendments. This serves to reinforce the view that these are amendments which are conceptually and substantively distinct from the unlawful amendments set out in the Scheme.
28. For these reasons, I consider that Schedules 3 and 4 to the Scheme satisfy both the test of "textual severability" and the test of "substantial severability" set out by Lord Bridge and accordingly that they should be severed from the unlawful parts of the Scheme and should not be quashed. The parties should therefore seek to agree an order for consideration by the court to reflect this ruling.

Legitimate expectation

29. Finally, Ms Laing also invited me to address the arguments regarding legitimate expectation which I put to one side in the main judgment: see paragraph [61] of the main judgment. She accepted that, in light of the main judgment, the legitimate expectation issue was academic, but submitted that nonetheless the parties or (if the case went on appeal) the Court of Appeal might derive benefit from having my views on that question.
30. I do not accept Ms Laing's invitation. As matters stand, the issue of legitimate expectation is purely academic and a court will not usually opine upon purely academic questions unless there is very good reason to do so. I am not persuaded that any sufficient reason exists in this case to warrant an expansion of the main judgment to deal with the legitimate expectation argument. If there is an appeal (no permission has yet been granted) and if it is successful, the Court of Appeal will have the same evidence before it as is before me and will be perfectly capable of deciding any issue of legitimate expectation for itself. Moreover, if an appeal is allowed, I do not feel confident to guess on what precise basis that might happen, so that there will be a significant risk that any obiter observations by me on the question of legitimate expectation will proceed on an erroneous and unhelpful basis so far as the Court of Appeal is concerned.
31. For these reasons, I remain of the view that it is not appropriate for me to consider the Claimant's alternative case based on alleged breach of legitimate expectation.