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You are here: BAILII >> Databases >> Upper Tribunal (Administrative Appeals Chamber) >> MP v Secretary of State for Work and Pensions [2009] UKUT 205 (AAC) (13 October 2009)
URL: http://www.bailii.org/uk/cases/UKUT/AAC/2009/205.html
Cite as: [2009] UKUT 205 (AAC), [2010] AACR 13
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MP v Secretary of State for Work and Pensions [2009] UKUT 205 (AAC) (13/10/2009)
Retirement pensions
deferred retirement
IN THE UPPER TRIBUNAL Appeal No. CP/2234/2007
ADMINISTRATIVE APPEALS CHAMBER
1. This is an appeal by the Claimant, brought with the permission of the chairman, against a decision of an appeal tribunal sitting at Kettering on 11 April 2007. For the reasons set out below that decision was in my judgment wrong in law and I set it aside. In exercise of the power in s.12 of the Tribunals, Courts and Enforcement Act 2007 I re-make the Tribunal’s decision, as follows:
The Claimant’s appeal against the decision of the Secretary of State made on 27 September 2006 is allowed. The decision made in or about January 1998 awarding state retirement pension from 18 January 1998 is superseded with effect from 27 September 2006 so as to include in the calculation of the basic (but not the additional) element of the Claimant’s pension an increase for deferment under section 55 of the Social Security Contributions and Benefits Act 1992 in respect of the period from 18 January 1993 to 18 January 1998.
Introduction
2. I held an oral hearing of this appeal at which Mr Ivan Hare of counsel, instructed by the Free Representation Unit, appeared on behalf of the Claimant, and Mr Jason Coppel of counsel appeared on behalf of the Secretary of State. I gave leave to the parties to make subsequent written submissions on certain points which arose during the hearing. I am grateful to both counsel for their very clear submissions, both written and oral.
3. The Claimant is a male to female transsexual who was born on 18 January 1933, and is therefore now aged 76. She married while living as a man, but in March 1989 she underwent gender reassignment surgery, and was divorced in 1992.
4. The Claimant continued to pay national insurance contributions until she attained the age of 65 in 1998, and was paid state retirement pension from that date, consisting of both the basic and an additional (earnings-related) element, calculated on the footing of her entitlement as a man.
5. The issues which have been debated in this appeal concern the effect on the Claimant’s pension entitlement of (i) the issue to her on 25 August 2006 of a gender recognition certificate under the Gender Recognition Act 2004 (“the 2004 Act”) (ii) the Claimant’s right to equal treatment under Article 4(1) of Council Directive 79/7 EEC (“the Directive”) and (iii) the fact that in November 2008 HMRC refunded to the Claimant the national insurance contributions which she had paid between the ages of 60 and 65 (i.e. between 1993 and 1998).
6. The practical questions to which answers are needed are:
(1) whether the Claimant’s pension falls to be reduced, and if so from what date, on the ground that she must be treated as not having accrued earnings factors in respect of the years 1993 to 1998;
(2) whether the Claimant is entitled to an increase in her basic and/or additional pension under the provisions in s.55 of the Social Security Contributions and Benefits Act 1992 on the ground that she should be treated as having deferred receipt of her pension between 1993 and 1998 and
(3) whether HMRC was right to refund the national insurance contributions which the Claimant paid in respect of those years.
7. In R(P) 2/09 a Tribunal of Commissioners decided an appeal on facts similar to those in this case. The Tribunal directed that the claimant’s pension was to include, from the effective date of the superseding decision:
(a) as regards the basic element, a percentage increase for deferment in respect of the fact that payment of pension had commenced at 65 rather than 60;
(b) as regards the additional element, whichever was the better of
(i) that percentage increase; and
(ii) any extra pension attributable to contributions paid/earnings factors accrued between the age of 60 and 65, if that was the effect of para. 7(4) of Schedule 5 to the 2004 Act
8. The Secretary of State in effect submits that for the purposes of the present appeal R(P) 2/09 does not resolve the questions which I referred to in para. 6 above, for the following reasons:
(1) The Tribunal of Commissioners did not consider whether the effect of the application of the claimant’s rights under the Directive was to override domestic law even to the extent of requiring the additional element of her pension to be reduced; further, there had been no refund of contributions in R(P) 2/09;
(2) It was conceded by the Secretary of State in R(P) 2/09 that on the facts of that case the entitlement to an increase for deferment was not excluded by s.27 of the Social Security Act 1998 (the test-case provision). In this case the Secretary of State contends that s.27 does prevent that entitlement.
9. The decision under appeal in this case was made on 27 September 2006. Two of the events on which the Secretary of State relies, namely (i) what the Secretary of State contends was an unequivocal election by the Claimant to rely on her rights to equal treatment under the Directive, and (ii) the repayment of contributions, occurred later, and neither the appeal tribunal nor I have (or had) jurisdiction to take them into account. However, both parties invited me to state my conclusions as to the correct outcome, taking into account all the events which have happened. I was told by Mr Coppel that there are other similar cases awaiting decision, and was invited to give as much guidance as I can. However, no details of the facts of these other cases were put before me.
The facts
10. The Claimant says (p.46), although no findings of fact have been made about it, that in January 1993 she telephoned the Pensions Office in Newcastle to request that her state retirement pension should commence on 18 January 1993, on her sixtieth birthday. She says that the woman at the Pensions Office told her that she would not get a pension until 65 and would have to continue paying national insurance contributions until then. The Claimant says that she accepted that statement, and so did not pursue the position further at that time. She continued to pay national insurance contributions until she was 65. It has not been suggested on the Claimant’s behalf that what happened in 1993 amounted to the making of a claim for state retirement pension.
11. On 26 September 1997 (p.54) the Claimant claimed state retirement pension from her 65th birthday on 18 January 1998, and a Category A basic and additional state retirement pension, calculated on the footing that she was a man, was awarded from that date.
12. The 2004 Act came into force on 4 April 2005. It contains specific provisions relating to the effect of the issue of a gender recognition certificate in relation to state retirement pension.
13. On 27 April 2006 the ECJ decided the reference from Mr Commissioner Bano in Richards v SSWP [2006] ECR 1-3585. The ECJ held that Article 4(1) of the Directive was to be interpreted as precluding legislation which denies a person who, in accordance with the conditions laid down by national law, has undergone male-to-female gender reassignment, entitlement to a state retirement pension on the ground that she has not reached the age of 65, when she would have been entitled to such a pension at the age of 60 had she been held to be a woman as a matter of national law.
14. On 25 August 2006 the Claimant was issued with a gender recognition certificate under the 2004 Act.
15. On 27 September 2006 the Secretary of State made a decision superseding and reducing, with effect from 25 August 2006, the Claimant’s award of retirement pension. The ground for supersession relied upon was a change of circumstances, namely the issue of the gender recognition certificate. The effect of the decision was to reduce the additional element of the pension from £23.08 per week to £5.39 per week, and therefore her total state retirement pension from £107.33 per week to £89.64 per week. The decision maker considered that that reduction was required by para. 7(1) of Schedule 5 to the 2004 Act, which provides that the amount of pension to which a person is entitled for any period after the certificate is issued shall be decided “as if the person’s gender had always been the acquired gender.” The decision maker reasoned that, had the Claimant been a woman throughout, she would not have continued to pay national insurance contributions between the ages of 60 and 65 and earnings factors for those years would not have been taken into account in determining the amount of her additional pension.
16. On 1 November 2006 the Claimant appealed against that decision. She stated that she had been advised that there were two options open to the Secretary of State: (1) that her retirement pension be paid on the basis that she was a male who had continued to pay contributions between 60 and 65 – i.e. without reduction of the additional pension or (2) that she be classified as a female, with a consequential reduction in her additional pension, but also an entitlement to be paid retirement pension in respect of the years between 60 and 65.
17. In a subsequent submission the Claimant said that if attention had been drawn to the fact that she would lose nearly £1000 per annum in pension by obtaining a gender recognition certificate, she would not have applied for one, as it was of no practical benefit to her at her age.
18. On 27 November 2006 Mr Commissioner Bano decided CP/428/2004, the appeal by Ms Richards in which he had made the reference to the ECJ. In accordance with the ECJ’s decision, he held that the appeal tribunal in that case had erred in law in not awarding Ms Richards retirement pension from the date of her 60th birthday.
19. On 11 April 2007 the Tribunal, by the decision now under appeal to me, dismissed the Claimant’s appeal against the decision of 27 September 2006.
20. On 16 May 2007 the Claimant wrote to the Tribunals Service seeking permission to appeal. She referred to the Richards decision and concluded by saying as follows:
“I….request that the Pensions Service abandons its discriminatory attitudes and delaying tactics and acts in a lawful manner. It should pay my pension from the date of my 60th birthday, 18th January 1993 until 18th January 1998. Having regard to the fact that I have been paid pension at the higher rate from that date or be allowed to retain the Additional Pension from the contributions I have paid after my 60th birthday and acknowledging the contributions at male level made during my working life.”
21. On 2 July 2007 the Claimant wrote to the Commissioners’ Office. Her letter included the following:
“I suggest that it would save you money to allow my appeal forthwith and pay my pension from the age of 60 as requested. You have already done this in the cases of ……………….which are identical to mine, except in one respect. That is that I paid in National Insurance contributions from the age of 60 until 65 to qualify me for Additional Pension payments. As you have stopped these I shall expect my contributions to be refunded. Failing this I shall expect my additional pension to be reinstated.”
22. On 23 May 2007 the Claimant was informed that the chairman had granted permission to appeal to a Commissioner.
23. On 3 September 2007 the Secretary of State made his first written submission in this appeal. This contended that the pension had been properly reduced. It was contended that para. 7(4) of Schedule 5 to the 2004 Act did not apply “as it is the realignment of the qualifying tax years which affects this case, not the payment of contributions.”
24. In her written submissions in this appeal (made in October 2007), in reply to those made by the Secretary of State, the Claimant said that she demanded to have her additional pension restored, because she had paid contributions between 60 and 65.
25. I then stayed further proceedings in this appeal pending the decision of the Court of Appeal in an appeal from a decision of Mr Commissioner Jacobs in CIB/2248/2006. However, that appeal did not proceed.
26. On 13 March 2008 the Tribunal of Commissioners decided R(P) 1/09 and R(P) 2/09.
27. On 20 July 2008 the Claimant wrote to the Pension Office stating that her pension had been reduced as a result of the issue of the gender recognition certificate, and continuing as follows:
“Please refund my contributions paid during these five years [i.e. ages 60 to 65], with interest earned, as they have not been included in my pension assessment ……..
Also, I would like to seek clarification whether a woman who has continued to pay contributions until she is 65 would have them included in her pension assessment.”
28. On 24 November 2008 I directed that the Secretary of State should make a further written submission dealing with the para. 7(4) issue, in the light of R(P) 1/09 and R(P) 2/09.
29. On 28 November 2008 HMRC refunded to the Claimant the contributions which she paid between the ages of 60 and 65, totalling some £5900.
The outcomes contended for
30. It is common ground that if the Claimant had been born a woman:
(1) She would not have continued to pay national insurance contributions after the age of 60;
(2) She would have become entitled from the age of 60 to payment of her state retirement pension, the additional element being calculated on the basis of earnings factors down to the age of 60;
(3) If she had deferred claiming entitlement to her pension until the age of 65, both the basic and additional elements would have been increased to compensate for the delayed receipt of the pension: s. 55 of the Social Security Contributions and Benefits Act 1992. The total amount of that increase would have been a little in excess of 37%.
31. It is no longer contended on behalf of the Claimant that she is entitled to be paid a lump sum by way of arrears of retirement pension in respect of the period 18 January 1993 to 17 January 1998 (i.e. the period between her 60th and 65th birthdays). Such a contention has been ruled out by the reasoning in R(P) 1/09, at paras. 30 to 44. In particular, it was held in para. 34 of R(P) 1/09, and applied in paras. 34 and 35 of R(P) 2/09, that the Directive does not preclude the application of the generally applicable domestic law time limits in respect of claims and the generally applicable restrictions on the alteration of existing awards.
32. No claim for retirement pension was made until 26 September 1997. A claimant has no entitlement to retirement pension unless he or she “makes a claim for it in the manner, and within the time, prescribed in relation to [it] by regulations ….” (s.1 of the Social Security Administration Act 1992). As the legislation then stood the time for claiming retirement pension was 3 months. Even if the claim which was made on 26 September 1997, which was for retirement pension from 18th January 1998, was capable of being regarded as a claim from a past date, retirement pension could not have been awarded from a date earlier than 26 June 1997, even had the significance of the Directive been appreciated at that time. Moreover, the decision awarding retirement pension from 18 January 1998 (the Claimant’s 65th birthday) pursuant to that claim could only be revised, in a manner favourable to the Claimant, if that decision “arose from an official error” (reg. 3(5)(a) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999). But there was no “official error” involved in that decision because the definition of official error in reg. 1(3) of excludes “any error of law which is shown to have been an error by virtue of a subsequent decision of a Commissioner or the court.” It was only the decision of Mr Commissioner Bano in CP/428/2004, applying the ECJ’s decision in Richards, which showed that the Claimant had a remedy under the Directive.
33. The Secretary of State contends that the answers to the questions which I set out in para. 6 above are: (1) yes, from 16 May 2007, the date when (the Secretary of State submits) the Claimant unequivocally asserted her right to equal treatment under the Directive, alternatively from 28 November 2008, the date of the refund of contributions ; (2) no; and (3) yes.
34. The contention on behalf of the Claimant is that the answers are: (1) no; (2) the Claimant is entitled to an increase in the basic element of the pension, but not in the additional element because, having regard to the answer to (1), that would amount to double benefit; (3) no. In my judgment the Claimant’s contentions are right.
The legislation
Schedule 5 to the Gender Recognition Act 2004
“7(1) Any question
(a) whether the person is entitled to a Category A retirement pension (under section 44 of the 1992 Act) for any period after the certificate is issued, and
(b) (if so) the rate at which the person is so entitled for the period,
is to be decided as if the person’s gender had always been the acquired gender.
(2) Accordingly, if (immediately before the certificate is issued) the person –
(a) is a woman entitled to a Category A retirement pension, but
(b) has not attained the age of 65,
the person ceases to be so entitled when it is issued.
(3) And, conversely, if (immediately before the certificate is issued) the person –
(a) is a man who has attained the age at which a woman of the same age attains pensionable age, but
(b) has not attained the age of 65,
the person is to be treated for the purposes of section 44 of the 1992 Act as attaining pensionable age when it is issued.
(4) But sub-paragraph (1) does not apply if and to the extent that the decision of any question to which it refers is affected by –
(a) the payment or crediting of contributions, or the crediting of earnings, in respect of a period ending before the certificate is issued, or
(b) preclusion from regular employment by responsibilities at home for such a period.
(5) Paragraph 10 makes provision about deferment of Category A retirement pensions.
10(1) The person’s entitlement to –
(a) a Category A retirement pension,
(b) a Category B retirement pension, or
(c) a shared additional pension,
is not to be taken to have been deferred for any period ending before the certificate is issued unless the condition in sub-paragraph (2) is satisfied.
(2) The condition is that the entitlement both –
(a) was actually deferred during the period, and
(b) would have been capable of being so deferred had the person’s gender been the acquired gender.”
s.27 of the Social Security Act 1998
“(1) Subject to subsection (2) below, this section applies where –
(a) the effect of the determination, whenever made, of an appeal to a Commissioner or the Court (“the relevant determination”) is that the adjudicating authority’s decision out of which the appeal arose was erroneous in point of law; and
(b) after the date of the relevant determination a decision falls to be made by the Secretary of State in accordance with that determination (or would, apart from this section, fall to be so made) -
(i) in relation to a claim for benefit;
(ii) as to whether to revise, under section 9 above, a decision as to a person’s entitlement to benefit; or
(iii) on an application made under section 10 above for a decision as to a person’s entitlement to benefit to be superseded.
(3) In so far as the decision relates to a person’s entitlement to benefit in respect of –
(a) a period before the date of the relevant determination; or
(b) in the case of a widow’s payment, a death occurring before that date,
it shall be made as if the adjudicating authority’s decision had been found by the Commissioner or court not to have been erroneous in point of law.
(4) In deciding whether a person is entitled to benefit in a case where his entitlement depends on his having been entitled to the same or some other benefit before attaining a particular age, subsection (3) above shall be disregarded for the purpose only of deciding whether he was so entitled before attaining that age.
(6) It is immaterial for the purposes of subsection (1) above –
(a) where such a decision as is mentioned in paragraph (b)(i) above falls to be made, whether the claim was made before or after the date of the relevant determination;
(b) where such a decision as is mentioned in paragraph (b)(ii) or (iii) falls to be made on an application under section 9 or (as the case may be) 10 above, whether the application was made before or after that date.
(8) For the purposes of this section, any reference to entitlement to benefit includes a reference to entitlement –
(a) to any increase in the rate of a benefit; or
(b) to a benefit, or increase of a benefit, at a particular rate.”
Section 55 of the Social Security Contributions and Benefits Act 1992 (as in force in 1998)
“(1) Where a person’s entitlement to a Category A or Category B retirement pension is deferred, Schedule 5 to this Act shall have effect for increasing the rate of pension.
(2) For the purposes of this Act a person’s entitlement to a Category A or Category B retirement pension is deferred if and so long as that person –
(a) does not become entitled to that pension by reason only –
(i) of not satisfying the conditions of section 1 of the Administration Act (entitlement to benefit dependent on claim), or
(ii) in the case of a Category B retirement pension payable by virtue of a spouse’s contributions, of the spouse not satisfying those conditions with respect to his Category A retirement pension; or
(b) in consequence of an election under section 54(1) above, falls to be treated as not having become entitled to that pension;
and, in relation to any such pension, “period of deferment” shall be construed accordingly.”
Analysis and conclusions
35. It is in my judgment helpful to proceed by first considering the position under domestic law – i.e. without regard to such rights as the Claimant may have arising from Art 4(1) of the Directive – and then to consider how that position is affected by the Claimant’s rights under the Directive and the refund of contributions.
(i) The position under domestic law
(a) Should the Claimant’s additional pension have been reduced?
36. This question was left open by the Tribunal of Commissioners in para. 45 of R(P) 2/09, because the decision which had been made in that case, reducing the claimant’s pension on the same ground as was done in this case by the superseding decision of 27 September 2006, was not under appeal. The Tribunal of Commissioners said merely that there was “cause for doubt” whether para. 7(4) of Schedule 5 to the 2004 Act had been given its intended effect.
37. Both parties are agreed that the answer to this question is “no”. Para. 7(1) of Schedule 5 to the 2004 Act provides that any question whether a person is entitled to a Category A retirement pension for any period after a gender recognition certificate is issued, and as to the rate of entitlement, is to be decided as if the person’s gender had always been the acquired gender.
38. However, as is now accepted by the Secretary of State, the decision of 27 September 2006 reducing the Claimant’s pension overlooked the terms of para. 7(4), under which para.7(1) does not apply “if and to the extent that the decision of any question to which it refers is affected by (a) the payment or crediting of contributions, or the crediting of earnings, in respect of a period ending before the certificate is issued.” In my judgment the Secretary of State is right in accepting that the issue whether the additional element of the Claimant’s pension should be reduced, on the ground that her contributions and earnings factors between the age of 60 and 65 cannot be counted, falls within para. 7(4)(a). The Claimant’s pension should therefore not have been reduced in reliance on para. 7(1).
(b) Was the Claimant entitled to an increase for deferment?
39. It appears to have been the clear view of the Tribunal of Commissioners in para. 48 of R(P) 2/09 that para. 10 of Schedule 5 to the 2004 Act would not have provided for any such increase on the facts of that case:
“As indicated in paragraph 43 of our decision in R(P) 1/09, the principle of equal treatment of a male-to-female transsexual under the Directive requires that she be accorded the same percentage increases in pension for deferment as a non-transsexual woman, for a period of deferment beginning with when the claimant first qualified for such equal treatment as a woman (or attaining the age of 60 if later) and ending with the actual starting date of her pension. It follows that a person in the present claimant’s position is entitled by the Directive to have her pension made up to the level required for equal treatment, calculated in the way just indicated, to the extent that the national law falls short of providing it; and self-evidently, the provision in paragraph 10 of Schedule 5 to the [2004] Act …… falls short of doing so in this case.” (My emphasis).
40. Para. 10 of Schedule 5 provides that a pension entitlement is not to be taken to have been deferred for any period ending before the gender recognition certificate is issued unless the entitlement both -
“(a) was actually deferred during the period, and
(b) would have been capable of being so deferred had the person’s gender been the acquired gender.”
41. There is no difficulty as to (b), on the facts of the present case. At the hearing I raised the question whether (a) was also satisfied (i.e. the Claimant’s entitlement was “actually deferred”), in that (on the basis that the Claimant is treated for pension calculation purposes, as para. 7 of Schedule 5 requires, as having always been a woman), entitlement to her pension was delayed from 60 to 65. However, I accept Mr Coppel’s argument that that is not so. In my judgment the words “actually deferred” mean that there must have been actual deferment on the basis that the claimant’s entitlement was her birth gender, rather than her acquired gender. I think that para. 10(2) is drawing a contrast between (in (a)) the position as it actually was during the putative deferment period on the basis of the claimant’s birth gender and (in (b)) the position as it could have been during that period on the basis of the Claimant’s acquired gender. To put the same point another way, if one takes “was actually deferred” in (a) as meaning “was deferred on the basis of the claimant’s notional entitlement under her acquired gender”, condition (b) would not appear to be adding anything to condition (a).
42. At the hearing I questioned whether, on this construction, there are any circumstances in which conditions (a) and (b) could both be satisfied. (If there are none, that would suggest that this construction is wrong). There appear to be no such circumstances in relation to the period between ages 60 and 65. A female-to-male transsexual could never satisfy condition (b) in respect of that period, and a male-to-female transsexual could never satisfy condition (a). The only case in which both conditions could be satisfied would appear to be that of actual deferment after the age of 65. Both male-to-female and female-to-male transsexuals would necessarily satisfy both conditions in that situation. It is possibly somewhat odd if, on the construction which I favour, para. 10 can never be satisfied in relation to delayed entitlement between 60 and 65, but that does not cause me to alter my view as to the meaning of the provision. As I have said, that seems also to have been the clear view of the Tribunal of Commissioners in R(P) 2/09.
(c) Should the Claimant’s contributions have been refunded?
43. On the basis of domestic law alone, it follows from the answer to question (a) above that there was no basis for refunding the Claimant’s contributions. The rationale for the refund was that her pension had to be recalculated in order to ignore earnings factors accrued between age 60 and 65. If no such recalculation was required, there was no basis for refunding the contributions.
(d) Summary
44. The Secretary of State’s decision under appeal to the Tribunal was made on 27 September 2006. It was a supersession decision, made on the Secretary of State’s own initiative, based on a change of circumstances (namely the issue of the gender certificate). The Tribunal was therefore in my judgment required, on appeal from that decision, to make a decision, having effect from and taking into account only circumstances down to that date, as to the amount of the Claimant’s pension entitlement.
45. Taking into account only domestic law the correct decision would have been that the Claimant’s pension was neither to be reduced (owing to the notional loss of earnings factors) nor increased (for deferment) from that date. As a matter of domestic law only, therefore, the Secretary of State ought not to have made a superseding decision on 27 September 2006.
(ii) The position taking into account Directive 79/7
(a) Was the Claimant entitled to an increase for deferment?
46. The Tribunal of Commissioners held, on the facts in R(P) 2/09, that the claimant there was entitled, by virtue of her right to equal treatment under the Directive, to the statutory increase for deferment, for a period of deferment beginning with when she first qualified for equal treatment as a woman (or attaining the age of 60 if later) and ending with the actual starting date of her pension. In the present case the period of deferment would be the whole period between the age of 60 and 65, and the total amount of the increase for deferment a little in excess of 37%.
47. The Tribunal of Commissioners recorded at para. 29 of R(P) 2/09 that the Secretary of State had accepted that
“section 27 of the [Social Security Act 1998] (the “test case” rule, referred to at an earlier stage in argument as potentially limiting the retroactive effect of Richards in social security cases) was of no relevance on the fact of this case, and was not relied on to limit any award to which the claimant might be entitled.”
48. As I understand it the reason for that concession was that the “relevant determination”, as defined in section 27(1)(a), was the not the decision of the ECJ on the reference from Mr Commissioner Bano in Richards, but Mr. Commissioner Bano’s decision of 27 November 2006, giving effect to the ECJ’s decision. Section 27 applies only where, after the date of the relevant determination, a decision falls to be made by the Secretary of State, in accordance with that determination, in one of the three situations mentioned in regulation 27(1)(b). On the facts of R(P) 2/09 the decision of the Secretary of State under appeal to the tribunal was made on 15 August 2006, before Mr Commissioner Bano’s decision, and on its terms section 27 therefore clearly did not apply. (The same was true on the facts of R(P) 1/09 and CSP 503/07, in both of which the same concession was also made by the Secretary of State).
49. However, the Secretary of State contends that on the facts of the present case section 27 does prevent any increase for deferment, apparently on the ground that the relevant decision which falls to be considered must be one which fell to be made after 27 November 2006.
50. In my judgment section 27 did not prevent the Claimant being entitled to an increase for deferment in this case, for the following reasons.
51. First, I do not accept that the decision which is relevant for present purposes was one which fell to be made after 27 November 2006.
52. The first decision made by the Secretary of State in the present case was that made on 27 September 2006, on the Secretary of State’s own initiative, superseding and reducing the Claimant’s pension with effect from 25 August 2006 on the ground of a change of circumstances, namely the issue of the gender recognition certificate.
53. In my judgment, in order to give effect to the Claimant’s right to equal treatment under the Directive, that decision should have included an increase for deferment in at any rate the basic element of the Claimant’s pension. The ground for that supersession, as the Tribunal of Commissioners made clear in para. 42 of R(P) 2/09, would have been error of law, rather than change of circumstances: Richards revealed the meaning and effect of the Directive that always ought to have been applied, and there was no temporal limit on the effect of the decision in Richards.
54. It is unnecessary for me to consider what the position would have been if the Secretary of State had not, on 27 September 2006, made a superseding decision on his own initiative. The fact is that he did so, and that decision was under appeal to the Tribunal, which gave the Tribunal jurisdiction to consider what decision ought to have been made on that date.
55. Mr Coppel contends that no decision fell to be made applying the Claimant’s rights under the Directive unless and until the Claimant had unequivocally elected to rely on those rights, which he submits was not until 16 May 2007, in the Claimant’s letter of appeal to the Comissioners. He submits as follows:
“Domestic legislation which is incompatible with an EU directive cannot be disapplied by the Secretary of State of his own motion. It is well-established that “a national authority may not rely, as against the individual, upon a provision of a Directive whose necessary implementation in national law has not yet taken place” (Criminal Proceedings against Kolpinghuis Nijmegen [1987] ECR 3969, para. 10). It is only once an individual has asserted directly effective EC law rights against the Secretary of State that he has an obligation to ignore domestic law which is incompatible with those rights and give effect to the Directive instead. In this case, the Appellant had not relied upon her EC law rights by the time of the decision (27 September 2006) so at that point the Secretary of State was bound to apply domestic law, even if incompatible with the Directive.”
56. It should be noted, however, that the Nijmegen case was very different. The questions referred for decision by the ECJ arose in criminal proceedings brought against an undertaking running a café, for stocking for sale and delivery a beverage which it called “mineral water” but which consisted of tap-water and carbon dioxide. The question was whether the member state (Holland) could rely against the defendant on the provisions of a Directive (in that case requiring member states to take measures necessary to ensure that only waters extracted from the ground of a member state and recognised by the responsible authority of that member state as natural mineral water) which had not been implemented by Holland. The answer given by the ECJ was no.
57. However, that is in my view very different from saying that in the present case the Secretary of State was not obliged, when considering whether to make any and if so what superseding decision on 27 September 2006 altering the amount of the Claimant’s pension, to give effect to the Directive in circumstances where to do so could only increase the amount of her pension, and therefore where it could only be to her benefit for her rights under the Directive to be invoked. Application of the Claimant’s rights under the Directive on 27 September 2006 would have resulted in a deferment increase of the basic element which I calculate as being about £30 per week. That would have been to the Claimant’s overall advantage, whatever the position in relation to the additional element and refund of contributions. In my judgment the Secretary of State was obliged to give effect to the Claimant’s rights under the Directive in those circumstances.
58. Further, although I recognise that the Secretary of State’s submission, in the form in which it is being made to me, is not recorded as having been made to the Tribunal of Commissioners, it is inconsistent with the reasoning and outcome in R(P) 2/09. In that case, as here, the initial decision was a superseding decision (on 15 June 2005), made on the Secretary of State’s own initiative on his being informed of the issue of a gender recognition certificate, reducing the amount of the Claimant’s pension by reason of removing from the calculation earnings factors accrued after the date of 60. Unlike the present case, however, that initial decision was not under appeal. What was under appeal was a subsequent decision, made on 15 August 2006, refusing the Claimant’s application to be paid pension in respect of the years between 60 and 65.
59. However, the Tribunal of Commissioners directed (see paras. 45, 46 and 51(3) of the decision) that, if (which it did not decide, but which is now in effect conceded by the Secretary of State in this appeal) the superseding decision of 15 June 2005 was wrong, and therefore an “official error”, the increase in pension for deferment should be given effect back to the effective date of that decision – in other words before the claimant had sought to rely on her rights under the Directive. Indeed, in para. 45 the Tribunal referred, in relation to the superseding decision of 15 June 2005, to “the still undetected error in not taking account of her entitlement to equal treatment under the Directive.” The Secretary of State’s current submission is also inconsistent with the Tribunal of Commissioner’s conclusion (in paragraph 40 of R(P) 2/09) that “the original decision in July 1999 determining the start date and rate of her pension entitlement …………….. had since been shown to have been erroneous in law, so that the correct ground for supersession was error of law, rather than (as the Secretary of State submits in this appeal) a change of circumstances consisting of reliance upon the Directive.”
60. In my judgment, therefore, the terms of s.27(1)(b) were not satisfied, because the decision “falling to be made” was not one some decision required after the date of the “relevant determination”, but the decision of 27 September 2006, made before the relevant determination.
61. In addition, I note that, as regards decisions made on supersession, s.27(1)(b)(iii) refers to a decision made “on an application made under section 10 above for a decision as to a person’s entitlement to benefit to be superseded”. Even if the superseding decision of 27 September 2006 had been made on, say, 28 November 2006 (after Mr Commissioner Bano’s decision) it would not have fallen within reg. 27(1)(b), because it was made on the Secretary of State’s own initiative, not on the Claimant’s application, and reg. 27 would therefore still have been inapplicable.
62. I come now to the second reason why, in my judgment, s.27 did not prevent the Claimant being entitled to an increase in at any rate the basic element of her pension, for deferment. It turns on the construction of s.27(3), which it is helpful to set out again here.
“In so far as the decision relates to a person’s entitlement to a benefit in respect of –
(a) a period before the date of the relevant determination; or
(b) [inapplicable]
it shall be made as if the adjudicating authority’s decision had been found by the Commissioner or court not to have been erroneous in law.”
63. In my view the words “in so far as the decision relates to a person’s entitlement to a benefit in respect of a period before the date of the relevant determination” are not apt, in the context of the purpose of s.27, to include “entitlement” for the purpose solely of determining whether, in relation to pension entitlement during a subsequent period, there should be an increase for deferment. Suppose, for the sake of argument, that the superseding decision under appeal in the present case had been made on 28 November 2006 (i.e. after Mr Commissioner Bano’s decision in Richards), on an application made by the Claimant on that date. Would the decision, or one aspect of it, have been one “relating to” “the Claimant’s entitlement to a benefit in respect of a period before [27 November 2006]”? The superseding decision could have had effect to alter the Claimant’s pension only as from 28 November 2006. The fact that, in determining the rate of entitlement as from that date, it would have been necessary to determine whether, but for failing to claim, the Claimant would have been entitled to pension prior to 18 January 1998 (when she attained 65), would not in my view have brought that aspect of the decision within the relevant words. By s.27(8) any reference to entitlement to benefit includes a reference to entitlement to any increase in the rate of a benefit, but the question for decision would have been whether the rate of benefit should be increased in respect of the period from 28 November 2006, not in respect of a period before 27 November 2006.
64. Under s.55 of the Social Security Contributions and Benefits Act 1992 a person’s pension is deferred “if and so long as that person does not become entitled to that pension by reason only (i) of not satisfying the conditions of section 1 of the Administration Act (entitlement to benefit dependent on claim) …..” When deciding whether there should be an increase for deferment, the question in relation to the period of alleged deferment is thus not whether the claimant was in fact entitled to benefit during that period, but whether she would have been so entitled if she had claimed benefit in respect of it. It does not seem to me that that is a question which falls naturally within the wording of s.27(3). As Mr Coppel himself put it when dealing with s.27(4):
“It cannot be right to say that entitlement to a deferral increase depends on entitlement to state pension when, according to s.55, a deferral increase is not paid where there is actual entitlement to state pension but only where entitlement to state pension is deferred.”
65. Had I been in Mr Coppel’s favour on s.27(3), I would not have held s.27(4) requires s.27(3) to be disregarded. I accept Mr Coppel’s submission that it would not, in that the question of deferment would not have depended on whether the Claimant was entitled to pension “before attaining a particular age”. I accept Mr Coppel’s submission that that provision is directed only at situations where entitlement to the same or some other benefit before a specified age is a condition of entitlement to the benefit which is in dispute. An example would be the mobility component of disability living allowance, where there can be entitlement after 65 only if there was entitlement before attaining that age. That is not so in relation to pension increases for deferment, for two reasons. First, it is not a condition of entitlement to such an increase that the claimant would (but for claiming) have been entitled to pension before a specified age. Secondly, as I have already pointed out in relation to the construction of s.27(3), entitlement to an increase for deferment does not depend on “having been entitled” to a pension, but on having not been entitled by reason only of not claiming.
66. Mr Hale submitted that, if s.27 is on its true construction applicable so as to prevent an increase for deferment, that would itself be in contravention of the Claimant’s rights under the Directive, and s.27 would therefore have to be disapplied. Mr Coppel’s response to that is that s.27 is an entirely conventional restriction on the retroactive effect of claims, which restrictions are in principle compatible with EC law. He points out that s.27 was considered by the Court of Appeal to be applicable in Hockenjos v Secretary of State for Work and Pensions [2005] IRLR 471 in order to limit the numbers of individuals who would be able to benefit from a ruling under Directive 79/7.
67. I accept Mr Coppel’s contention. In para. 21 of Johnson v CAO(No 2)[1994] ECR I-5483 the ECJ summarised the applicable law as follows:
“The right conferred on women by the direct effect of Article 4(1) of Directive 79/7 to claim benefits for incapacity for work under the same conditions as men must be exercised under the conditions determined by national law, provided that, as the Court has consistently held, those conditions are no less favourable than those relating to similar domestic actions and that they are not framed so as to render virtually impossible the exercise of rights conferred by Community law (see Case C-338/91 [the Steenhorst-Neerings case] [1993] ECR I-5475, paragraph 15, and Emmott, paragraph 16).”
68. The limitations at issue in the Johnson and Steenhorst-Neerings cases were conventional time limits for claiming benefit, i.e. in effect restrictions on the backdating of claims, similar to those which apply to retirement pension and which the Tribunal of Commissioners held in R(P) 1/09 to be effective to prevent the claimant there relying on the Directive so as to claim arrears of benefit in respect of a period more than 12 months before the date of claim.
69. Section 27 is of course a somewhat different restriction, but it is nevertheless of a procedural nature, and it applies to all types of decision, and not simply to decisions about equal treatment rights. It seems to me that if (contrary to my view) s.27 had as a matter of construction applied, the Steenhorst-Neerings principle would have applied so as to permit s.27 to take effect in accordance with its terms. The requirement that the restriction should not “render virtually impossible the exercise of rights conferred by Community law” would seem to me to have been satisfied. The Claimant could have made her claim to retirement pension at any time from the age of 60 onwards, and if she had done it would have been decided long before Mr Commissioner Bano’s decision in Richards, and so would not have been subject to s.27.
(b) Reduction of the additional element of the Claimant’s pension
70. Mr Coppel submits as follows.
“Once the Appellant asserted her rights to equal treatment under the Directive, the Secretary of State came under an EC law obligation to afford her the treatment she would have received in her acquired gender (subject always to conditions for recognition of a transsexual being met and the application of national procedural rules). That obligation included an obligation to disregard her contribution record after age 60 and to calculate her ASP on the basis of her contributions to 60 (which would result in a reduction of that element in her benefits). And the obligation arose notwithstanding that a particular aspect of the changes which fell to be made in order to ensure equal treatment was unfavourable to the Appellant: para 7(4) of Sch. 5 was disapplied, for all purposes. On this alternative basis, the Appellants ASP fell to be reduced on the date on which she asserted her EC law rights.”
71. In my judgment, however, the application of the Claimant’s EC law rights did not require her additional pension to be reduced in circumstances where contributions had been paid in respect of the period between 60 to 65. I have held above that para. 7(4) of Schedule 5 to the 2004 Act has the effect that, under domestic law, the Claimant’s pension was not required to be reduced so as to remove, from the calculation of additional pension, earnings factors accrued between 60 and 65. If it had been realised at the time that the Claimant was required to be treated as a woman, she would not have continued to pay contributions after the age of 60. But that was not realised and the Claimant did continue to pay contributions. In my judgment the application of EC law did not require an overriding of domestic law’s recognition, in para. 7(4) of Schedule 5, of the fact that in that situation the payment of contributions should be taken into account by earnings factors between 60 and 65 being included in the calculation of additional pension. There is in my judgment no reason why, in the working out of what equal treatment requires, EC law should not recognise that between the ages of 60 and 65 the Claimant continued to pay contributions as if she were a man. It is impossible fairly to give equal treatment to someone on the basis that she was throughout a woman, if she has in the past paid additional contributions on the basis of being a man, unless either additional pension benefits are given in respect of the contributions, or the contributions are refunded (probably with interest). There is in my judgment no reason why EC law should in that situation override the perfectly fair and sensible provision in para. 7(4) of Schedule 5.
72. To hold otherwise would be inconsistent with R(P) 2/09, in which it was held (see para 51(4) and (5)) that the award which was to be made by application of the claimant’s equal treatment rights was to include, from its effective date, (a) as regards the basic element of the pension, the percentage increase for deferment, and (b) as regards the additional (earnings-related) element of the pension, “whichever is the better of (i) that percentage increase and (ii) any extra pension attributable to the operation of paragraph 7(4) of Schedule 5 …for periods after the claimant was 60; (but not both, because that would involve an element of double benefit for periods after 60 and more than required under the Directive for Equal Treatment.)”.
73. On the facts of the present case, there can be no doubt that (b)(ii) is the more valuable.
74. Mr Coppel submitted that the Claimant could not “mix and match” benefits – i.e. that they could not be calculated partly on the basis of the Claimant being a man, and partly on the basis of her being a woman. However, R(P) 2/09 shows that they can and should be, in order to recognise the continued payment of contributions after age 60.
75. In my judgment the supersession decision which should have been made, on 26 September 2006, was therefore simply to increase the basic element of the Claimant’s pension for deferment, with effect from that date (the supersession having been made on the Secretary of State’s own initiative). No alteration of the calculation of the additional pension was required, the existing calculation being more favourable than would have been a calculation based on applying a deferment increase to a pension calculated without including earnings factors between 60 and 65. The effect of the supersession decision which should therefore have been made was therefore indubitably to increase the Claimant’s pension. No question was capable of arising, at that time, as to whether it was or was not in the Claimant’s interest for her equal treatment rights under the Directive to be applied. It is for that reason that that I held above that the Secretary of State, in making the supersession decision on 26 September 2006, was required to take into account the Claimant’s rights under the Directive even though the Claimant had not requested him to do so.
76. Given that the supersession decision which should have been made on 27 September 2006 was one which fully took into account the Claimant’s EC law rights, no further decision was required on some later date when (as the Secretary of State submits) the Claimant unequivocally elected to rely on her EC law rights. The question whether, and if so when, the Claimant unequivocally elected to rely on her rights under the Directive is therefore in my judgment of no possible significance, and therefore does not fall to be answered in this case.
77. I acknowledge, however, that there may well be cases where a fair and sensible outcome may be to refund the contributions paid after the age of 60, and to calculate additional pension without taking into account earnings factors accrued in those years. That may well be the case, for example, where the pension entitlement arises for decision shortly after the age of 60, so that the position can probably be reversed quite easily, and probably without any significant financial consequences. That is not so in the present case, however: see paragraph 83 below.
(iii) The significance of the refund of contributions.
78. It is submitted by Mr Coppel in his Skeleton Argument that the fact that the Claimant accepted a refund of contributions paid after the age of 60 means that her pension entitlement fell to be recalculated, as from the date of the refund, to reflect her revised contribution record. That does not seem to me to be a possible conclusion, on the facts of this case.
79. There is provision in regulation 52 of the Social Security (Contributions) Regulations 2001 for return of contributions paid in error. Clearly, where that is done, the Claimant’s contribution record will not include the refunded contributions.
80. However, I have concluded above that the decision which should have been made on 26 September 2006 was not to reduce the Claimant’s additional pension so as to remove earnings factors accrued after the age of 60. In those circumstances, the contributions paid after the age of 60 cannot in my judgment be regarded as having been paid “in error”, and it would therefore not in my judgment have been right for the Secretary of State to return the contributions at that time.
81. In a situation such as the present, where contributions were paid by the Claimant after the age of 60, prior to the entry into force of the 2004 Act, on the basis that the and the Claimant was a man, it would no doubt be possible for the Claimant and HMRC/the Secretary of State to agree that the contributions paid after the age of 60 will be refunded, on the footing that the Claimant’s additional pension will then be calculated without taking into account earnings factors accrued after the age of 60.
82. However, it is not in my view possible to infer such an agreement on the facts of the present case. The Claimant’s requests for the return of her contributions were made at a time when the issue of the correct calculation of her pension entitlement had been raised by her by way of appeal, and were made on the footing that if, as the Secretary of State contended (but which the Claimant denied), her additional pension had been properly reduced, it ought to follow that her contributions paid after the age of 60 should be refunded. The requests were made at a time when the correct calculation of her pension entitlement was in the melting pot, to be decided by means of this appeal. The requests cannot in my judgment be regarded as an offer, in the event of the contributions being refunded, to have her additional pension calculated without taking into account earnings factors accrued after the age of 60.
83. Furthermore, the most clearly expressed request for a refund, namely that made on 20 July 2008 (see para. 27 above) asked for a refund with interest. If the refund which has been made did not include interest (and the Secretary of State has nowhere suggested that it did), then the terms of that request were in any event not complied with. The contributions in question were paid during a period between 10 and 15 years prior to the refund. The amount of the refund was £5,900, and the amount of the reduction in pension was about £18 per week (£936 per annum). The amount of additional pension of which the Claimant has been deprived, by the decision made on 26 September 2006, is already some £2800. She would need to live only about another 4 years to be better off with an unreduced pension and no refund, well within the normal life expectancy of a person of the Claimant’s age.)
84. I do not see how the refund of contributions can have been a ground for superseding and reducing the Claimant’s pension entitlement. The contributions were in my view refunded by HMRC under the mistaken view that the 2004 Act required the Claimant’s pension to be reduced in order to remove earnings factors accrued between 60 and 65. Although it is not a matter which I could ever have jurisdiction to decide, it seems to me that the refunded contributions must be recoverable by HMRC from the Claimant as money paid under a mistake of fact and/or law. Mr Hare confirmed in his Skeleton Argument that the Claimant is willing to repay the refunded contributions.
Conclusion
85. My answers to the questions which I set out in para. 6 above are therefore the same as those contended for on behalf of the Claimant (see para. 34 above). A decision giving effect to my conclusions is set out in paragraph 1 above. It is on the footing that the Claimant will repay to HMRC the contributions which have been mistakenly refunded to her.
Judge of the Upper Tribunal