(1) THE TRUSTEES OF UPPINGHAM SCHOOL RETIREMENT BENEFITS SCHEME FOR NON-TEACHING STAFF (2) THE TRUSTEES OF UPPINGHAM SCHOOL v MRS E M SHILLCOCK [2002] EWHC 641 (Ch)

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
[2002] EWHC 641 (Ch)Case No Case No: CH 1997 U 6492Venue Royal Courts of Justice, Strand London WC2A 2LL
Between
(1) THE TRUSTEES OF UPPINGHAM SCHOOL RETIREMENT BENEFITS SCHEME FOR NON-TEACHING STAFF (2) THE TRUSTEES OF UPPINGHAM SCHOOLAppellantsMRS E M SHILLCOCKRespondent
Before
Mr Justice NeubergerMr Jason Coppel (instructed by Berryman Shacklock, Nottingham) for the AppellantsMr John Cavanagh QC for the Pensions OmbudsmanHearing dates: 25th, 26th February 2002Date 19 April 2002
[1]Introductory This is an appeal, brought by the Trustees of Uppingham School Retirement Benefits Scheme for Non-Teaching Staff ("the Trustees" and "the Scheme" respectively) and the Trustees of Uppingham School ("the School"), against a determination of the Pension Ombudsman. In that determination, dated 30th October 1997, he decided that Mrs E M Shillcock had been the victim of indirect sex discrimination, amounting to maladministration within section 146(1) of the Pensions Schemes Act 1993 ("the 1993 Act"). All references to sections in this judgment are to sections of that Act, unless the contrary is indicated.[2]Mrs Shillcock was employed by the School as a member of its non-teaching staff from 2nd June 1984 until 2nd November 1996. During that period, she worked part-time, for about 20 hours every week. On 7th June 1996, she complained to the Ombudsman that she had been excluded from membership of the Scheme in circumstances which amounted to indirect sex discrimination.[3]The Rules of the Scheme provided that an employee was ineligible for membership, if he or she was in an "Eligible Category of Employment", and satisfied such conditions as the School, as the employer, from time to time decided and notified to employees. Employees could, at the discretion of the School, become members on the "Renewal Date", 1st April, immediately after they came eligible. Again, it was up to the School, as employer, to decide whether an employee was within an "Eligible Category of Employment".[4]The School and the Trustees prepared a booklet for employees in connection with the Scheme. The booklet notified employees that the School could, at its discretion, offer them the opportunity to join the Scheme, and, if made that offer, they could choose to join on 1st April following completion of one year's service and satisfaction of certain conditions. Those conditions included being employed on the permanent non-teaching staff of the School, being aged between 21 and 55, being employed in the United Kingdom, and "earn[ing] an annual salary in excess of the lower earnings limit". The lower earnings limit was defined in the booklet as:
"The lower earnings limit for Class 1 National Insurance contributions as specified in accordance with section 1 of the Social Security Pensions Act 1975."
[5]The Scheme was a final salary scheme, which provided, in familiar terms, for pension benefits to be calculated by reference to l/60th of final pensionable earnings for each year of qualifying pensionable service. In this connection, "qualifying pensionable service", meant service within an Eligible Category of Employment, and "final pensionable earnings" were calculated by reference to the average of pensionable earnings during the years leading to retirement. There was no definition of "pensionable earnings" in the Scheme, but "pensionable salary" was defined as:
"Annual salary calculated as at 1st April in each year, subject to deduction equal to the Lower Earnings Limit, provided that no reduction in Pensionable Earnings will be made at 1st April in any year as a result of any increase in the Lower Earnings Limit."
The Scheme was a contributory scheme with employees' contributions being 4ce% of reckonable salary.[6]There were two other features of the Scheme which I should mention in connection with this appeal. The first is that an additional benefit was available to members of the Scheme, namely a death in service benefit. The value of this benefit was equal to twice the deceased employee's annual salary at the date of death. Secondly, the Scheme was a contracted-in scheme.[7]For the purpose of this appeal, the most important features of the Scheme, as supplemented by the booklet, were summarised by Mr John Cavanagh QC, who appeared on behalf of the Pensions Ombudsman, as follows:• An employee had to be invited to join the Scheme by the School;• No employee would be eligible to be invited to join the Scheme unless he or she earned an annual salary in excess of the lower earnings limit;• Pension benefits under the Scheme were calculated by reference to the part of the annual salary that exceeded the lower earnings limit;• In addition to retirement benefits, members of the Scheme enjoyed a potential death in service benefit.[8]I should explain the lower earnings limit. The basic state pension is payable to men at 65 and women at 60 (albeit that the qualifying age will be equalised at 65 for women born after 5th April 1955). To be eligible for a full basic pension, a person must have paid National Insurance contributions for 90% of his or her working life (44 years for a man and 39 years for a woman). Where a person has paid contributions for less than that period, the pension is reduced appropriately, but there is a minimum qualification requirement equivalent to 25% of the full pension. For employees, the standard form of contribution is Class 1 contributions, which consist of primary contributions paid by the employee and secondary contributions paid by the employer. The primary contributions for an employee are calculated as a percentage of earnings up to a so-called "upper earnings limit", but if an employee earns less than the "lower earnings limit" no contributions are payable. So far as secondary contributions are concerned, employers pay a percentage of each employee's earnings with no upper limit, but, as with primary contributions, no secondary contributions are payable in respect of an employee earning less than the lower earnings limit. It is open to an employee to make Class 3 contributions, which are voluntary flat-rate contributions paid by persons who have inadequate contribution records, in order to boost the benefits they would otherwise get, although there are restrictions on the ability to pay Class 3 contributions. The relevant law is contained in the Social Security Contributions and Benefits Act 1992.[9]Mrs Shillcock was never invited to join the Scheme. Indeed, in her evidence to the Ombudsman, she said that, although she had made an application to join, it had been rejected. Except in respect of the last two years of her employment with the School, Mrs Shillcock earned less than the lower earnings limit in each year of her employment. In those last two years, 1994/95 and 1995/96, Mrs Shillcock earned more, albeit only a very small amount more, than the lower earnings limit, namely £1.87 and £2.16 respectively.[10]The evidence before the Ombudsman established that, of the 188 non-teaching staff at the School, 55 earned less than the lower earnings limit. Of the total of 188 non-teaching staff, 126 (or around 67%) were women; of the 55 who earned less than the lower earnings limit, 52 (or about 94%) were women.[11]On this evidence, the conclusions reached by the Ombudsman were as follows: i) Mrs Shillcock's exclusion from the Scheme contravened section 118 of the Pension Schemes Act 1993, as amended; ii) The Scheme was contrary to Article 119 (now Article 141) of the EC Treaty ("Article 141") in that it excluded more women than men, and its requirements could not be objectively justified on economic grounds; iii) If Mrs Shillcock had been admitted to the Scheme, it would have been unlawful to disallow contributions and pension entitlements for the whole of her earnings below the lower earnings limit.[12]In these circumstances, the Ombudsman directed pursuant to section 151(2) that:• The Trustees should arrange for Mrs Shillcock to be admitted to the Scheme with effect from 7th June 1993, being the date three years before her complaint;• The Trustees should arrange for Mrs Shillcock to be provided with pension accrual that did not discriminate against her because of her low earnings, as compared with the earnings of higher earning full-time employees;• The duty to make such arrangements was conditional upon Mrs Shillcock, at the Trustees' request, paying to the Scheme contributions at a level consistent with her having been a member of the Scheme since 7th June 1993.[13]The respondent to this appeal is Mrs Shillcock, but she does not appear in person or through legal representation. The Ombudsman applied for permission to be heard at the outset of the appeal, and this was very sensibly not opposed by the Trustees or the School. As I understand it, at least some of the points raised by this appeal are of some potential general significance, and it is also right to say that I have not found them by any means easy. In those circumstances, it was obviously desirable that this appeal should be fully argued on both sides. Although I suppose there was a residual discretion to refuse to hear counsel for the Ombudsman, I had no hesitation in permitting Mr Cavanagh to address me on his behalf, to answer the arguments advanced by Mr Jason Coppel, who appeared for the Trustees and the School ("the appellants"). The issues on this appeal[14]The appellants accept that the effect of section 118, as amended, and/or of section 62 of the Pensions Act 1995 ("the 1995 Act"), and indeed of Article 141 is to prohibit indirect sex discrimination in access to occupational pension schemes. However, they challenge the determination of the Ombudsman on his first two findings, namely that Mrs Shillcock's exclusion from the Scheme was unlawful, on the following principal grounds:• The Ombudsman was wrong to proceed under section 118 and Article 141, because the relevant provision was section 62 of the 1995 Act;• Mrs Shillcock's claim of sex discrimination should have been rejected, because she had not identified a male comparator performing equal work who was treated more favourably than she was;• The Ombudsman had no jurisdiction to consider the issue of Mrs Shillcock's access to death in service benefit since she was not an authorised complainant in respect of such benefits.[15]As to the third finding of the Ombudsman, the unlawfulness of excluding salary up to the lower earnings limit for pension purposes for those within the Scheme, the appellants contend that:• The Ombudsman incorrectly relied on Article 141 as conferring a separate or extra right on Mrs Shillcock;• Mrs Shillcock's claim of sex discrimination should have been rejected since she had not identified a male comparator performing equal work who was treated more favourably than she was;• The terms of the Scheme did not treat any group of employees less favourably than any other group, but merely ensured that, when calculating pensionable salary, the same deduction, namely the lower earnings limit, was made from the actual salary of every employee: accordingly, it could not have been indirectly discriminatory;• The Ombudsman was not entitled to reject the appellants' justification of the basis upon which benefits were calculated under the Scheme.[16]I propose to deal with the following issues in the following[17]The first and second questions arise in relation to the first two findings of the Ombudsman, and also in relation to his third finding. The third question only arises in relation to his first two findings. The fourth and fifth questions effectively embrace the last three points raised by the appellants in relation to the Ombudsman's third finding. It is right to mention that there was an issue as to whether this was a case concerned with denial of access to the Scheme or of discrimination in respect of the benefits available under the Scheme. On behalf of the Ombudsman, it is contended that he rightly treated the case as one involving denial of access, rather than, as the appellants contend, one of discrimination both as to access and as to the benefits available under the Scheme. I do not need to determine the point, in light of the conclusions I have reached on the five issues identified above.[18]However, I reject the appellants' case on this issue, in so far as it is based on the point that Mrs Shillcock was not excluded from the Scheme because she earned below the lower earnings limit in 1994/5 and 1995/6. as she received a salary very slightly higher than that limit in those two years. The evidence before the Ombudsman strongly suggests that the appellants proceeded on the understandable, albeit mistaken, assumption that Mrs Shillcock's salary fell below the lower earnings limit in the last two years of her employment, just as it had in the preceding ten years. There is no other likely or even possible reason for her exclusion from the Scheme in those two years, at last so far as I am aware. If there had been a different reason, it would have been only too easy for the appellants to have told the Ombudsman what it was. They did not do so. If that was, as I think, the appellants' reason for not inviting Mrs Shillcock to join the Scheme, and Mrs Shillcock is prepared to accept that as the reason and not to challenge its factual basis, then I think the Ombudsman was entitled, indeed possibly bound, to proceed on that basis. Section 118, section 62 of the 1995 Act, and Article 141[19]The appellants contend that the Ombudsman was wrong in relying on section 118, because it had been repealed by the time that Mrs Shillcock's complaint was made, and that the relevant provision was section 62 of the 1995 Act. For essentially the same reason, as I understand it, they say that it was unnecessary for the Ombudsman to consider the terms of the Scheme by reference to Article 141.[20]Article 141, formerly 119, of the Treaty requires, by paragraph 1, each Member State to "ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied." Although not expressly mentioned therein, it is clear from the wide definition in paragraph 2, indeed arguably from the natural meaning of the word, that "pay" includes pension rights.[21]Section 118(1) provides:
"(l)....[T]he equal access requirements in relation to an occupational pension scheme are that membership of the scheme is open to both men and women on terms which are the same as to age and length of service needed for becoming a member and which do not otherwise discriminate between them either directly or indirectly. (2) A rule does not contravene the equal access requirements only because it confers on the scheme's trustees or managers, or others, a discretion whose exercise may result in a person being more or less favourably treated than they otherwise would be, so long as it does not provide for the discretion to be exercised in any discriminatory manner as between men and women."
[22]Section 118 was amended by the addition of the italicised words at the end of subsection (1) with effect from 31 May 1995 by The Occupational Pension Schemes (Equal Access to Membership) Amendment Regulations 1995 (SI 1995/1215). The section (or its Statutory predecessor) was in force in its original or amended form, for the great majority of Mrs Shillcock's period of employment. However, it was only after, and as a result of, the amendment in 1995 that denial of access to a pension scheme, on grounds which were indirectly discriminatory on grounds of sex, became unlawful under the section. By the time Mrs Shillcock submitted her complaint on 7 June 1996, section 118 had been replaced by section 62 of the 1995 Act.[23]Section 62 of the 1995 Act provides as follows:
"(1) An occupational pension scheme which does not contain an equal treatment rule shall be treated as including one. (2) An equal treatment rule is a rule which relates to the terms on which - (a) persons become members of the scheme, and (b) members of the scheme are treated. (3) Subject to subsection (6), an equal treatment rule has the effect that where - (a) a woman is employed on like work with a man in the same employment, (b) a woman is employed on work rated as equivalent with that of a man in the same employment, or (c) a woman is employed on work which, not being work in relation to which paragraph (a) or (b) applies, is, in terms of the demands made on her (for instance under such headings as effort, skill and decision) of equal value to that of a man in the same employment, but (apart from the rule) any of the terms referred to in subsection (2) is or becomes less favourable to the woman than it is to the man, the term shall be treated as so modified as not to be less favourable. (4) An equal treatment rule does not operate in relation to any difference as between a woman and a man in the operation of any of the terms referred to in subsection (2) if the trustees or managers of the scheme prove that the difference is genuinely due to a material factor which - (a) is not the difference of sex, but (b) is a material difference between the woman's case and the man's case."
[24]This section was introduced with effect from 1st January 1996 in response to the judgment of the European Court of Justice in Barber - v - Guardian Royal Exchange [1990] ICR 616 on the effect of Article 141. Accordingly, in so far as it relates to the terms on which members of a scheme are treated it only can have effect in relation to service after 17 May 1990 - see section 63(6) of the 1995 Act.[25]I think that the Ombudsman was entitled to rely on section 118 as amended, in respect of much of the period of Mrs Shillcock's employment (i.e. 31st May to 31st December 1995), although, by the same token, section 62 of the 1995 Act was in point for the last months (1st January to 2nd November 1996). However, that conclusion is of no particular significance on this appeal: it is common ground that, whichever is the correct provision, the outcome is the same. Section 62 of the 1995 Act is modelled on section 1 of the Equal Pay Act 1970 ("the 1970 Act"); indeed, by virtue of section 63(4) of the 1995 Act, section 62 thereof is to be construed as one with section 1 of the 1970 Act. Although that was not made quite as clear in relation to the construction and effect of section 118, subsection (4)(a) thereof provided for Regulations which effectively incorporated the 1970 Act principles for pay into pensions, and there were two other references to the 1970 Act in section 118. Furthermore, if section 118 does not go as far as section 62 of the 1995 Act, it is, in my view, hard to quarrel with the Ombudsman's conclusion that Mrs Shillcock could rely on Article 141. After all, section 62 of the 1995 Act replaced section 118, in order to ensure compliance with Article 141, which has been held to be capable of direct effect on a number of occasions by the ECJ - see, for instance, Bestuur van het Algemeen Burgerlijk Pensioenfonds - v - Beune [1995] IRLR 103, at paragraph 52. The need for a male comparator[26]In support of the appellant's contention that a male comparator was necessary under section 118 and under Article 141, Mr Coppel relies on two decisions of the House of Lords concerned with section 1 of the 1970 Act. In Strathclyde Regional Council - v - Wallace [1998] ICR 205 and Glasgow City Council -v- Marshall [2000] ICR 196 , it was made clear that a male comparator was necessary. Accordingly it is contended that this must apply equally to a claim under section 62 of the 1995 Act or section 118, and, indeed, under Article 141. It seems to me that, rather than determining that issue, at least in relation to Article 141, I should refer it to the European Court of Justice, unless I am satisfied that it is acte clair , or that it is unnecessary to determine it, on the basis that the appeal would be allowed on some other ground. While there is considerable force in Mr Coppel's argument, I am not satisfied that the point is acte clair .[27]My uncertainty on the issue derives support from the reference to the ECJ made by the Court of Appeal in Allonby - v - Accrington and Rossendale College [2001] IRLR 364 - see at paragraphs 51 to 59 of the judgment. In particular, at paragraph 56, Sedley LJ referred to an "apparent conflict" between the ECJ authorities on the need for a comparator in pension cases. As to the need for a comparator for the purposes of section 118, that is ultimately academic: given that Article 141 can have direct effect, the decision of the ECJ on the issue would be determinative. If no comparator is required for Article 141 purposes, that would effectively override any such need under section 118. If Article 141 does require a comparator, then, especially in light of the authorities cited by Mr Coppel, I would have thought it virtually inevitable that the same conclusion would apply to section 118.[28]Following the conclusion of the argument in this appeal, Mr Cavanagh and Mr Coppel wrote to draw my attention to the recent decision of the Court of Session, Inner House, in South Ayrshire Council - v - Morton [2002] IRLR 256 , and the Opinion of the Advocate General in A Lawrence - v - Regent Office Care Limited, Case C-320/00, (14th March 2002 unreported). In the decision of the Inner House and in the Opinion of the Advocate General, consideration was given to the decisions of the ECJ in Macarthys Limited - v - Smith [1980] ICR 672 , which, particularly in paragraph 15, is of assistance to the appellants' case as to the need for a male comparator. The decision of the Inner House and the Opinion of the Advocate General do not seem to me to lend much support to Mr Cavanagh's contention that the decision in Macarthys [1980] ICR 672 , can no longer be safely regarded as good law, but they do not persuade me that this first issue is acte clair . First, neither the decision of the Inner House nor the Opinion of the Advocate General has the same force as to the possible need for a comparator for Article 141 purposes as observations in the Court of Appeal: I have in mind, of course, what was said in Allonby [2001] IRLR 364 especially at paragraph 56. Secondly, there must be a real possibility that the ECJ may disagree with the Advocate General, in Lawrence (unreported). Thirdly, it is clear from the decision of the Inner House and from the Opinion of the Advocate General that the whole topic of comparators is by no means entirely simple in any event.[29]Accordingly, I consider that the appropriate course is to put the issue as to whether there is a need for a male comparator in this case on one side for the moment, and to assess the other arguments which have been raised by the appellants. If I come to the conclusion that the appeal should be allowed on the basis of one of those other arguments, then there would be no need to refer this issue to the ECJ. On the other hand, if the appeal would otherwise be dismissed, then this issue will have to be referred. Jurisdiction over death in service benefit[30]I turn to the second issue, namely, whether it was open to the Ombudsman to consider Mrs Shillcock's complaint about her exclusion from death in service benefit. On the face of it, this is an academic issue, as Mrs Shillcock has ceased to be employed by the School, and is still alive. However, she had ceased to be employed by the time of the Ombudsman's decision, he dealt with it, and this aspect of his decision is under appeal, so I should therefore also deal with it. However, quite apart from this, the Ombudsman's jurisdiction over this issue may be relevant for determining whether he had jurisdiction to determine the lawfulness of the terms of the Scheme, as opposed to the lawfulness of Mrs Shillcock's exclusion from the Scheme.[31]Given that the Ombudsman is a creature of Statute, the resolution of the issue must turn on the relevant statutory provisions from which the Ombudsman derived his jurisdiction. The functions of the Ombudsman are dealt with in section 146, in Part X of the 1993 Act. Subsections (1), (2), and (7) of that section provided at the material time:
"(1) The Pensions Ombudsman may investigate and determine any complaint made to him in writing by or on behalf of an authorised complainant who alleges that he has sustained injustice in consequence of maladministration in connection with any act or omission of the trustees or managers of an occupational pension scheme or personal pension scheme. (2) The Pensions Ombudsman may also investigate and determine any dispute of fact or law which arises in relation to such a scheme between- (a) the trustees or managers of the scheme, and (b) an authorised complainant, and which is referred to him in writing by or on behalf of the authorised complainant. (7) The persons who, for the purposes of this Part are "authorised complainants" in relation to a scheme are- (a) a member of the scheme; (b) the widow or widower, or any surviving dependant, of a deceased member of the scheme; (c) where the complaint or dispute relates to the question- (i) whether a person who claims to be such a person as is mentioned in paragraph (a) or (b) is such a person, or (ii) whether a person who claims to be entitled to become a member of the scheme is so entitled, the person so claiming."
[32]Section 146(8) contains certain definitions for the purpose of Part X of the 1993 Act, including a definition of "member" which, in relation to a pension scheme:
"Includes a person- (a) who is or has been in pensionable service under the scheme, or (b) who is or has been treated under section 181(4) as a member in relation to the scheme for the purposes of any provision of this Act."
[33]This takes one to section 181(1), which provides that "pensionable service" has the meaning given to it in section 70(2), which is in these terms:
"Unless the context otherwise requires, "pensionable service" in relation to a scheme and a member of it, means...service in relevant employment which qualifies the member (on the assumption that it continues for the appropriate period) for long service benefits under the scheme."
[34]That in turn leads to section 70(1), which defines "long service benefit" in relation to a scheme as meaning "The benefits which will be payable under the scheme, in accordance with legal obligation, to or in respect of a member of the scheme on the assumption-(a) that he remains in relevant employment, and(b) that he continues to render service which qualifies him for benefits until he attains normal pension age; and in this definition "benefits" means- (i) retirement benefit for the member himself at normal pension age, or (ii) benefit for the member's wife or husband, widow or widower, or dependants, or others, on his attaining that age or his later death, or (iii) both such descriptions of benefit."[35]The Ombudsman proceeded on the basis that Mrs Shillcock was an "authorised complainant" within section 146(7)(c)(ii), because she was "claim[ing] to be entitled to become a member of the [S]cheme", and that her complaint about her exclusion from death in service benefit was within the wide words ("any complaint" about "any act or omission") of section 146(1). Accordingly, he concluded that he had jurisdiction to entertain her complaint of exclusion from death in service benefit. The appellants' objection to that conclusion is based on the fact that the application of sections 146(8)(a), 181(1), 70(2), and 70(1) to section 146(7) demonstrates that Mrs Shillcock was an "authorised complainant" only because she was complaining about her exclusion from pension, and not because she was complaining about her exclusion from death in service benefit. The reason for this is that death in service benefit, unlike pension, is not "long service benefit" within section 70(1).[36]Accordingly, the appellants argue that it was not open to Mrs Shillcock to complain, or to the Ombudsman to consider, her exclusion from death in service benefit. I have come to the conclusion that this argument is correct. I accept that that conclusion can be said to involve cutting down the naturally wide meaning of the words of section 146(1) taken on their own. But the expression "any complaint" must take its meaning from its context, and that context includes the qualifying words "by...an authorised complainant", a class of persons limited to those enjoying, or claiming, only "long service benefit". What if the Ombudsman had concluded that Mrs Shillcock only had a valid complaint about her exclusion from death in service benefit, and not in respect of her exclusion from pension? It would seem capricious if he could have upheld her complaint about her exclusion from death in service benefit, if it was coupled with an unjustified complaint about her exclusion from pension, but that he could not even have considered the former complaint if it had been made on its own. Yet that, it would appear, is the effect of the Ombudsman's view on this point. It would result in any employee, who had an arguable complaint only about exclusion from benefits which were not long service benefits, raising unjustifiable complaints about his exclusion from long service benefit, merely to make his application competent, by appearing to fall within section 146(7)(c)(ii).[37]The point is not entirely free of relevant authority. In Westminster City Council - v - Haywood [1998] Ch 377, the construction of section 146(1) adopted by the Ombudsman here appears to have been assumed to be correct at first instance. The contrary view does not seem to have been considered by Robert Walker J when discussing "the first jurisdiction issue" at [1998] Ch 387H - 390B. However, the fact that he does not appear to have questioned that construction of itself lends real support to the contention that it is correct. Certainly, it was necessary to the conclusion reached by the Judge that the Ombudsman's view was correct.[38]In the Court of Appeal, Millett LJ, with whom Kennedy and Swinton Thomas LJJ agreed, said this at [1998] Ch 409C-F:
"I find it very difficult to accept the notion that, by administering two schemes as one ... the Council could confer upon the Pensions Ombudsman a jurisdiction which he would not have if it administered them separately. This apart, the relationship between the wide definition of "occupational pension scheme" and the narrower jurisdiction conferred on the Pensions Ombudsman by reference to an "authorised complainant"...was not fully explored before us; but it is strongly arguable that the jurisdiction of the Pensions Ombudsman is limited to the investigation and determination of complaints by persons entitled to long service benefits as such .....In light of the view I have formed of the facts, however, it is not necessary to decide this, and I prefer to leave the point, which may be of more general importance, for future decision."
[39]It is quite clear from the last sentence of that quotation from Millett LJ's judgment that the Court of Appeal were leaving the point open. However, the impression which I, at any rate, get is that they were inclined again, rather than in favour of, the construction favoured by the Ombudsman in this case: I have especially in mind the opening words of the passage quoted above. Whether or not that is right, I take a different view from the Ombudsman for the reasons I have given.[40]For the Ombudsman, it is said that the death in service benefit was one of the benefits provided by the Scheme which was principally a scheme concerned with long service benefit, and therefore the Ombudsman had jurisdiction to consider Mrs Shillcock's complaint of exclusion from death in service benefit. I do not think that this justifies the contention that the present issue is distinguishable in principle from that discussed in the passage I have quoted from Millett LJ. In each case the question is whether the Ombudsman has jurisdiction in relation to a complaint of exclusion from what I will clumsily call non-long service benefit as such because the complainant is also complaining of exclusion from long service benefit. In my view, the Ombudsman's argument ultimately misses the point. I accept that, if Mrs Shillcock had been entitled to complain about her exclusion from a right to long service benefit (i.e. from pension) when the Ombudsman could have ordered her admission in to the Scheme, which would have incidentally resulted in her having a right to death in service benefit (if she had not retired from service). However, the fact that her inclusion in the Scheme would have happened to result in her being entitled to death in service benefit, does not mean that the Ombudsman had jurisdiction to entertain her complaint of exclusion from death in service benefit as such.[41]The fact that A's valid complaint of exclusion from long service benefit can, through an order for his admission into the Scheme, result in A receiving non-long service benefit, does not to my mind justify the view that B's valid complaint of exclusion from non-long service benefit should, for the same sort of reason, result in his receiving long service benefit, when there was no valid basis for complaining about his exclusion from such benefit. The essence of the difference is that A is entitled to complain under section 146(7) because he has been excluded from long service benefit, whereas B is not so entitled because the only benefit from which he has been wrongly excluded is non-long service benefit. Mrs Shillcock's exclusion from pension: a relevant difference in treatment?[43]The Ombudsman upheld Mrs Shillcock's complaint to the effect that her exclusion from the right to receive a pension under the Scheme was unlawful on the following basis. First, he concluded that the policy which excluded salary up to the lower earnings limit for the purpose of admission to the Scheme (and, indeed, for the purpose of assessing pensionable salary for those in the Scheme) resulted in discrimination against women, in that a significantly higher proportion of women employees were thereby excluded from the Scheme. Secondly, he took, the view that the policy which resulted in that discrimination could not be objectively justified. Subject to one possible point, the appellants do not challenge the first step in the argument (which receives direct support, on the facts of this case, from common sense and from the test propounded by the ECJ in R - v - Secretary of State ex p Seymour-Smith [1999] ICR 447 at paragraph 60). However, they make at least two criticisms of the Ombudsman's subsequent reasoning. First, they contend that he should have considered whether there was a relevant difference in treatment between those earnings above the lower earnings limit and those earning below it, and, that, had he done so, he could only have concluded the issue in favour of the appellants. Secondly, they argue that the Ombudsman was wrong to hold that the policy in question could not be objectively justified on grounds unrelated to sex discrimination. I shall consider those two arguments in turn.[44]The appellants' first contention is said by Mr Coppel to be effectively established by the decision of the House of Lords in Barry - v - Midland Bank plc [1999] ICR 859 . In that case, the complaint of Mrs Barry, a part time worker who became voluntarily redundant, was that the method of calculating her severance payment amounted to indirect discrimination, contrary to section 1 of the 1970 Act and Article 141 (then Article 119), because it failed to take into account the time spent and salary earned during an earlier period when she was working full time. The Court of Appeal rejected her claim (see at [1999] ICR 319 ) on the basis "that if there was prima facie discrimination it was objectively justified", to quote from Lord Slynn of Hadley at [1999] ICR at 864B.[45]Mr Coppel's case is that, on a proper analysis, only one member of the House of Lords, Lord Nicholls of Birkenhead, rejected Mrs Barry's appeal on that ground, and that the other four members founded their rejection of the appeal on a different basis. That basis is to be found in the speech of Lord Slynn at [1999] ICR 862E, namely:
"The first question which arises is whether there is a difference in treatment at all between full-time and part-time workers for the purposes of the Act and the Treaty. In that regard, it is not sufficient to ask whether one gets more or less money than the other. It is necessary to consider whether, taking account the purpose of the payment, there is a difference in treatment."
[46]Mr Coppel says that it was because the majority considered that there was no difference in treatment that the appeal was dismissed. If that is the correct analysis of the decision in Barry [1999] ICR 859 , then it is said that the question which must be, but was not, considered here is whether there was a difference in treatment between those earning more, and those earning less, than the lower earnings limit. Further, Mr Coppel argues that, if the Ombudsman had asked himself that question, he would have been bound to answer in the negative. If Mr Coppel's analysis of Barry [1999] ICR 859 , is correct, then I accept that that conclusion follows: subtracting the lower earnings limit from the earnings of every employee for the purpose of assessing pensionable salary involves a consistent, not a discriminatory, approach to all categories of employee.[47]Although Mr Cavanagh launched an attractive attack on Mr Coppel's analysis of the reasoning of the majority of the House of Lords in Barry [1999] ICR 859 , I have come to the conclusion that it is correct. It is fair to say that there are one or two phrases, in the speeches of Lord Slynn (especially the reference to "the purpose of the payments" at [1999] ICR 862F), Lord Steyn (who made reference to "the special facts of this case" at [1999] ICR 872H) and Lord Clyde (at [1999] ICR 876 E, where he referred to "the primary objective of the scheme") which would give one pause for thought. They could be said to indicate that the nature and purpose of the severance pay scheme was a relevant factor, which, in turn, would indicate that objective justification was part of the reasoning of at least some of the majority in Barry [1999] ICR 859 .[48]However, that has not persuaded me that the appellants' analysis of the majority's reasoning is wrong. The speech of Lord Hoffmann at [1999] ICR 873B-876D is accepted by Mr Cavanagh, rightly in my view, as being consistent with the appellants' case on this issue. It seems pretty clear from the speech of Lord Slynn that he thought he was deciding the appeal on the basis alleged by Mr Coppel. Thus, at [1999] ICR 862H-863A, he said that it was "not ... a relevant difference in treatment to base all employees' severance payments on their final salary". Further, the way in which he expressed his ground for rejecting the appeal, and contrasted it with the reasoning of the Court of Appeal at [1999] ICR 863E-864B, supports the appellants' interpretation. It is equally, if not more, clear that Lord Steyn and Lord Clyde thought that they were not deciding the appeal on the basis of objective justification - see at [1999] ICR 873 A and 877A respectively, where they each said that they were not deciding the appeal on the same basis as the Court of Appeal, although, if they had had to decide the question of objective justification, they, like Lord Nicholls, would have agreed with the Court of Appeal. It may be that, in the passages relied on by Mr Cavanagh, their Lordships were doing no more than emphasising that the feature of the scheme under attack in that case was genuine.[49]As I see it, therefore, the position in this case is as follows. The purpose of the rule, that pensionable salary was arrived at by deducting the lower earnings limit from actual salary, was to achieve a broad integration between benefits under the Scheme and the provision of the state pension. It was not artificial, and it applied equally to all employees. To many people, it may not seem a particularly attractive arrangement at least at first sight, but that is not the point. As Lord Steyn, Lord Hoffmann, and Lord Clyde made clear in Barry at [1999] ICR 872H, 873F-874A, and 876G respectively, neither Statute nor Article 141 "mandate any particular method by which pay should be calculated", and "as long as the method used by the scheme is not discriminatory, one sex cannot object that they would have done better against the other if a different method had been employed" (to quote Lord Hoffmann). Further, while probably not relevant, the apparent unfairness of the more poorly paid qualifying for proportionately less (or, as in Mrs Shillcock's case, no) pension, can be said to be balanced by their having had to pay proportionately lower (or in cases such as that of Mrs Shillcock, no) contributions to the Scheme, as well as being entitled to make voluntary Class 3 contributions to the State Scheme. Mrs Shillcock's exclusion from pension: objective justification[50]On this basis, it may not be strictly necessary to consider the appellants' attack on the Ombudsman's ruling of no objective justification for the deduction of the lower earnings limit from salary to assess the level of contributions or pension for those in the Scheme. However, the point was fully argued, and the conclusion I have reached on the appellants' argument based on Barry [1999] ICR 859 is not one I have found easy. Accordingly, I turn to consider the Ombudsman's conclusion that the policy could not be objectively justified. As Mr Cavanagh says, the decision of the Ombudsman can only be challenged in this Court on a point of law - see section 151(4). Therefore his rejection of the appellants' objective justification can only be overturned if it was based on an error of law or if it was a conclusion which, properly directed, he could not have reached.[51]The proper approach to objective justification was helpfully summarised by Peter Gibson LJ in the Court of Appeal in Barry at [1999] ICR 336B (cited with approval by Sedley LJ in Allonby [2001] IRLR 364 at paragraph 23):
"One must first consider whether the objective of the scheme is legitimate. If so, then one goes on to consider whether the means used are appropriate to achieve that objective and are reasonably necessary for that end."
It is for the appellants to establish objective justification, not for Mrs Shillcock, or indeed the Ombudsman, to establish its absence -see per Lord Nicholls in Barry at [1999] ICR 868D. It is also worth quoting what Lord Nicholls said at [1999] ICR 870E-F:
"The more serious and disparate the impact upon women or men, as the case may be, the more cogent must be the objective justification. There seem to be no particular criteria to which the national court should have regard when assessing the weight of the justification."
[52]The Ombudsman's first ground for rejecting objective justification was Mrs Shillcock's exclusion from death in service benefit which the appellants' objective justification was not capable of explaining. For the reason given above, namely that it was not "long service benefit" within the 1993 Act, I do not think that that benefit was properly within his terms of reference. Apart from that, the Ombudsman rejected the reason advanced by the appellants, for the policy of deducting the lower earnings limit from actual salary when computing pensionable salary for the purpose of admission to the Scheme, or for computation of pension under the Scheme. As expressed in their submissions to the Ombudsman, the appellants explained their policy on the ground that it avoided the risk of double pension fund payments. That arises because it is open to employees earning less than the lower earnings limit, who are therefore liable to make Class 1 contributions, to make voluntary, Class 3, contributions, and thereby to become entitled to a state pension. Mr Coppel expressed the justification of the appellants' policy rather more broadly, as seeking to achieve "broad integration with the state pension scheme".[53]The Ombudsman rejected that reason for justifying the policy, partly on the ground that there was no evidence that employees who were paid less than the lower earnings limit made voluntary Class 3 contributions, and such employees would receive no pension at all. He also pointed out that there was no equivalence between the state pension attributable to Class 3 contributions, and a pension awarded under the Scheme. In any event, he held that the policy did not achieve fairness. He did not say in terms on which of the three aspects identified by Peter Gibson LJ he relied, legitimacy of objective, appropriateness of means, or reasonable necessity of means. That may well be explicable by the fact that the answer could depend on the way the policy is described. If it is on the narrower basis advanced to the Ombudsman by the appellants, then the legitimacy of the objective was rejected. If the wider justification advanced before me by Mr Coppel is relied on, then I think the Ombudsman would quarrel with the appropriateness and necessity of the means, rather than suggesting that integration with the state pension scheme was, of itself, an illegitimate policy.[54]In relation to the interrelationship of Article 141 and the integration of occupational pension schemes with the state pension scheme, I should mention two decisions of the ECJ. In Roberts -v- Birds Eye Walls Ltd [1994] ICR 338 , it was held that certain higher, "bridging", pension payments to men were justifiable as their aim and effect, in general terms, was to equalise pensions between men and women for a period, once the state pension was taken into account. To my mind, this clearly establishes that integration with the state scheme can provide objective justification for even a discriminatory policy, but that does not, of course, mean it always will do so. By contrast, in Beune [1995] IRLR 103, the ECJ held that Article 141 was infringed, where different treatment between men and women under an occupational pension scheme was sought to be justified by reference to their respective differential treatment under the state scheme. Although, at first sight, these two decisions may appear hard to reconcile, I believe that they are consistent. The facts of Beune [1995] IRLR 103 are complicated, but the infringement arose, in essence, because there was no equal treatment between married men and married women, whether one looked at their respective occupational pension rights alone, or at the combination of their respective occupational pension rights and their rights under the state scheme. In other words, unlike in Birds Eye [1994] ICR 338 , the discrimination policy in Beune [1995] IRLR 103 was unlawful, because the occupational pension rights did not achieve, and did not seek to achieve, equality between married men and married women, either taking those rights on their own or taking them together with their state pension rights.[55]The appellants' policy, as they explained it to the Ombudsman, was based on the fact that employees, such as Mrs Shillcock, who were paid less than the lower earnings limit, could make Class 3 contributions if they wished, and could thereby qualify for a state pension. It was accordingly decided to leave it to them to decide whether to pay towards a pension under the state scheme, rather than to permit them or require them to subscribe towards an occupational pension scheme. Otherwise, it was considered, they would be able to subscribe for, and to obtain, double pensions. As I see it, the convenient approach is to treat the question for the Ombudsman on the issue of objective justification as being whether this was a legitimate objective. If it was, then it is hard to see what criticism could be made of the means by which this end was achieved, namely excluding those employees who were paid less than the lower earnings limit from the Scheme. Equally, if it was not a legitimate objective, then the Ombudsman's conclusion to that effect cannot be overturned.[56]The Ombudsman said that he did "not find the desire to prevent lower paid workers from earning double pensions on the same element of remuneration an objective which could justify" the rule that salary up to the lower earnings limit should be disregarded for pensionable salary purposes or, it would seem, for admission to the Scheme. He also said that the rule did "not achieve real fairness between" those earning above, and those earning below, the lower earnings limit, "given the higher paid group's greater access to both occupational and state pensions."[57]The appellants are, in my judgment, justified in criticising part of the reasoning of the Ombudsman in reaching this conclusion. Thus, his comment that the rule did "not achieve real fairness" between the two groups of people appears to me to set too high a standard. Further, it seems to me wrong that the Ombudsman should reject a particular policy put forward by pension trustees, on the basis of changing the objective advanced by the Trustees, and then criticising the policy as not meeting that objective. A little later in his determination, it appears to me that the Ombudsman made the same error, when he described the relevant objective of the Scheme as "to produce a net pension for all employees which is the same percentage of earnings". That is an inaccurate and too restrictive an interpretation of the objective. It seems to me that the Ombudsman was thereby falling into the same error as the appellant in Barry [1999] ICR 859 : it is not open to a person to criticise an occupational pension policy under section 118, section 62 of the 1995 Act or Article 141 simply on the basis that he or she would be better off if the policy was different, or, even, if it was better - see at [1999] ICR 872H, 873F-874A, and 876G, referred to above.[58]Further, in another passage, the Ombudsman said it was his "conclusion that in assessing whether there has been discrimination I should consider only the benefits provided by the Scheme". In so far as that was intended to accord with the objective of the Scheme, it was wrong, because the justification for the policy in question was based on the terms of the State Pension Scheme. If it was intended to be a statement of law, then, as I have indicated, it appears to me to be inconsistent with the ECJ's reasoning in Birds Eye [1994] ICR 338 .[59]The fact that the appellants can identify certain passages in the Ombudsman's decision which are open to criticism does not necessarily mean that he reached the wrong conclusion. However, the fact that he misdirected himself in a number of respects entitles, indeed requires, me to look closely at his overall reasoning with a view to deciding whether to reconsider the issue myself on the grounds that he misdirected himself. In this connection, at least to my mind, the most helpful course is to consider the arguments advanced by Mr Cavanagh to support the Ombudsman's decision that the policy could not be objectively justified.[60]The first point made by Mr Cavanagh is that, as the Ombudsman pointed out, there is no direct correlation between the payment of Class 3 Contributions and qualification for a State Pension. A person who pays Class 3 Contributions in a particular year will only qualify for a full State Pension if he pays Class 3 (or Class 1) Contributions for 90% of his working life. I do not find that persuasive. A person will only receive a full pension under the Scheme if he or she is a contributing member for 40 years, ignoring exceptional cases. I do not see how this point impinges on the question of discrimination. Similarly, the fact that a pension under the Scheme would be different from a State Pension seems to me to miss the point.[61]The second argument raised by Mr Cavanagh is that the appellants' policy proceeded on the assumption that employees paid less than the lower earnings limit would pay Class 3 Contributions, whereas there was no evidence to support that assumption, which, indeed, is, as the Ombudsman thought, inherently unlikely. In this connection, while I agree with the Ombudsman that the facts in Birds Eye [1994] ICR 338 can be distinguished, the principle which can be extracted from it, that an occupational pension scheme policy can be based on the existence of a right to make contributions to another scheme, rather than on the fact that such contributions are or will be made, appears to me to be of general application.[62]I agree with Mr Coppel's contention that the effect of the ECJ's reasoning in that case, and in particular in paragraphs 25 to 28, is concerned to ensure equal access between equivalent male and female employees to pension benefits, rather than being directed to the question of whether those employees choose to exercise the rights available to them on a non-discriminatory basis. In paragraph 27 the ECJ referred to the fact that married women had "freedom of choice" in relation to payment of lower contributions towards their State pensions, and in paragraph 28 the ECJ went on to say: "It would be irrational to disregard that factor, and to calculate the bridging pension by reference to the amount of State Pension which the woman concerned actually receives." (And see paragraph 21 of the Advocate General's Opinion to the same effect).[63]In effect, it seems to me that any criticism inherent in this part of the Ombudsman's reasoning is more of the domestic legislation, which provides for voluntary, rather than compulsory, Class 3 Contributions, than of the appellants' policy.[64]The third ground raised by Mr Cavanagh for upholding the Ombudsman's decision rejecting objective justification is that the decision in Birds Eye [1994] ICR 338 , to the effect that one can effectively aggregate the State Pension rights with occupational pensions scheme rights to see if discrimination in the latter scheme can be justified, "has been thrown into question by the subsequent judgment of the ECJ in Beune [1995] IRLR 103". For the reasons I have given, it appears to me that, on analysis, there is no inconsistency between the two cases. In the latter case there was discrimination which fell foul of Article 141 because the occupational pension payable respectively to married men and women differed, whether one took them separately or together with their respective state pension rights.[65]Finally, it is said on behalf of the Ombudsman that, even if the effect of admitting those earnings below the lower earnings limit would have been that they received state pensions and occupational pensions, there is nothing inherently objectionable in this. I accept that as a proposition, but it misses the point. The fact that there would be nothing objectionable to the receipt of double pension does not mean that there is therefore something inherently objectionable to the scheme which seeks to avoid such a double pension.[66]The policy of the Scheme was, as Mr Coppel says, that it would be sufficient that all employees have the opportunity to accrue a State pension, rather than a pension under the scheme, on earnings equal to, or less than, the lower earnings limit. The fact that this policy applied irrespective of whether employees actually chose to make such contributions does not seem to me to render that policy illegitimate. I reach that conclusion on the basis of common sense and in light of the reasoning of the ECJ in Birds Eye [1994] ICR 338 at paragraphs 24-28. It is a policy which some might not like or agree with, but that is not enough to result in its being illegitimate. To leave it to those earning below the lower earnings limit to decide whether to make Class 3 contributions to the State pension scheme, or whether to make no contributions, and to ensure that such employees could not have a double pension in respect of such earnings, does not appear to me to be illegitimate.[67]Any policy of that sort may have its adherents and its opponents. It is primarily for the trustees of the pension fund and the employers to decide on such policies. The Court should not be supine in its enforcement of Article 141 and its domestic equivalent. However, in my view, it should not be over-ready, at least in cases of alleged indirect discrimination, to substitute its own view for that of the employer and trustees. Conclusion[68]Although, as I have mentioned, the Ombudsman ordered that Mrs Shillcock be afforded membership of the Scheme (on terms) by reference to a date three years before her complaint, this temporal limitation is said by Mr Cavanagh to be inappropriate in light of what the ECJ said in Preston - v - Wolverhampton Health Care [2000] ICR 961 at paragraph 40. Because of the conclusions I have reached on the other issues, it is unnecessary for me to deal with that point. However, I should say that it appears to me that Mr Cavanagh's argument is right in principle. Nonetheless, if I had dismissed the appellants' appeal, I would have been reluctant to give effect to the argument. As Mr Coppel says, it would be a little quaint to vary the Ombudsman's determination against the appellants on their appeal, in light of an argument put forward on behalf of the Ombudsman and in the absence of any notice of cross-appeal. In saying that, I intend no criticism of the Ombudsman or of Mr Cavanagh in raising the point: indeed, it was proper to do so.[69]In the event, I propose to allow the appeal. For the reasons I have given, it appears to me that it was not open to the Ombudsman to make any findings in favour of Mrs Shillcock against the appellants under section 118 or under Article 141. The possibility of a reference to the ECJ on the issue of the need for a male comparator does not arise.

order

i) Should the Ombudsman have proceeded under section 118 and Article 141, or under section 62 of the 1995 Act? ii) Was there a need for a male comparator? iii) Did the Ombudsman have jurisdiction over Mrs Shillcock's complaint about exclusion from death in service benefit? iv) Was the Ombudsman right to uphold Mrs Shillcock's complaint that she was wrongly excluded from pension, given that he did not and could not find that any group of employees was less favourably treated than any other group? v) Was the Ombudsman right to reject the appellant's case on objective justification for their policy for admission to pension?

Cited in 2 later judgments