Hick Hargreaves & Co Ltd v Roscoe [1991] UKEAT 205_91_0810

EAT

Hick Hargreaves & Co Ltd v Roscoe

[1991] UKEAT 205_91_0810 · 1991-10-08

MR JUSTICE WOOD (PRESIDENT) : Mr Roscoe was born on the 21st January 1930. He was first employed by Hick Hargreaves & Co Ltd (the Company) on the 28th September 1945. He took early retirement on 30th June 1990 at the age of 60, after 40 years pensionable service. By an Originating Application dated 27th July 1990, he alleged that he had suffered sexual discrimination in that although he had opted to take an immediate pension, his pension had been discounted whereas a woman retiring at the age of 60 would have received a pension without discounting. In his claim he relied upon BARBER v. GUARDIAN ROYAL EXCHANGE ASSURANCE GROUP

[1990] ICR 616

-a Decision of the European Court of Justice given on the 17th May 1990.

An Industrial Tribunal sitting in Manchester on 13th March 1991 decided as follows:

"We therefore:- (i) declare that the applicant has been discriminated against on the grounds of sex contrary to Article 119 of the Treaty of Rome, and

(ii) we order that the respondents ensure payment to the applicant of such sum as will remove the sex discrimination in pension benefits of which he has been found to be the victim."

The Company appeals.

Mr Pannick for the Company asked us to adjourn the hearing, but Miss Gill instructed by the Equal Opportunities Commission, who support Mr Roscoe, strongly opposed this.

After hearing detailed submissions from both sides and considering skeleton arguments on the appeal in general, we have decided to adjourn the full hearing of this Appeal until after the European Court of Justice has given its decision in the cases of COLOROLL PENSION TRUSTEES LTD v. RUSSELL and NEATH v. HUGH STEEPER LTD . The former is a reference to Luxembourg from the High Court and the latter from an Industrial Tribunal.

It is only right in this difficult and fast developing area of the law of discrimination that we should give our reasons. The industrial members sitting with me have extensive experience of pension schemes to be found on both sides of Industry. They point out that it must be remembered that the principles involved in reaching any decision in the present appeal will have the widest effect. Employment is not limited to the huge industrial concerns or to Government, those affected will include Trade Unions; Charities and many other institutions who have established pension schemes of various types. The successful claims of individual pensioners may not always be to the benefit of employees as a whole.

Since the 27th June 1946 the Company has operated a Pension Scheme. Both employers and employees contribute. By his Contract of Employment Mr Roscoe was required to join that Scheme. He remained a member until the 30th June 1990. Although initially a compulsory Scheme, it subsequently became a voluntary one. From the 8th April 1978 it was a "contracted out" Scheme (contracted out of the State Earnings Related Pension Scheme). The Members were kept informed of changes in the Rules of the Scheme or its legal framework.

The Scheme has six Trustees; three director and three employee Trustees. The Chairman is one of the former and he has a casting vote. The Scheme is managed on behalf of the Trustees by the Prudential Assurance Company.

Over the years there have been changes in the ages at which men and women have been eligible to join, but in November 1977 the age for both was 25 and in 1990 it was changed to the age of 20.

The present Scheme is one which is often known as a "Balance of Cost Scheme". The Industrial Members are of the view that the majority of pension schemes are likely to be such.

Rule 11 (B) of the present Scheme reads:-

"Rule 11 (B) EMPLOYERS' CONTRIBUTIONS

The Employers shall pay periodic contributions to the Fund of the amount which after taking account of the Members' contributions is in the opinion of the Trustees required to enable the Trustees to make due provision for the benefits under the Scheme. The amounts of the contributions to be paid by the Employers shall from time to time be determined by the Trustees and notified to the Employers and not less than one month's notice in writing shall be given to the Employers of any variation proposed by the Trustees of the rate of the Employers' contributions.

The Employers' contributions shall be paid by the Employers to the Trustees or as they shall direct at such intervals as may be required by the Trustees."

The effect of this Rule is that it is the responsibility of the Trustees to ensure that the total funds within the Scheme are sufficient to meet the rights of each and every Member at the date of assessment and to this end it is the usual practice of Trustees to receive a report from Actuaries at not less than three yearly intervals and to require the employer to make such contribution to the capital of the fund as is necessary to meet the prospective liabilities of that fund. The decision involves a careful financial assessment in the light of the relevant factors affecting each Member. It is the function of the Trustees to safeguard the fund and for any breach of trust they would be liable to the Members. The actuaries are advising upon the basis of the Rules of the Scheme and the existing state of the law.

The capital fund of some other schemes is similarly examined periodically and correction is made by adjusting contributions both from employee and employer rather than through the principle of "balance of cost" as indicated above. A third type of pension scheme (normally called a "Money Purchase Scheme") simply arranges for the use of that part of the capital fund to which an employee may be entitled at the normal date of retirement for the purchase of an annuity. Yet a fourth form is the "Non-contributory" Scheme, where the employee makes no contribution and the employer is responsible for the whole of the cost. In each case an essential part of the calculation of the quantum of any pension is based on service and contribution.

From the moment that an employee elects to join a pension scheme he/she in consideration of the payment of a contribution under the Rules of the Scheme, will have a right to benefits under those Rules. There is at that stage one kind of "entitlement". There will also arise a right to claim against the Trustees in the event of a breach of trust.

The "Normal Date of Retirement" under the present Scheme means in relation to a Member the next day preceding the 65th birthday for a male Member and the next preceding the 60th birthday for a female Member. On retirement at Normal Retirement Date a pension is paid of 1/60th of final pension pay for each year of pensionable service, subject to a maximum of 40 years.

That is set out in Rule 12A of the Scheme which reads in its relevant parts:

"(A)PENSION ON RETIREMENT ON OR AFTER THE NORMAL RETIRING DATE

On retirement of a Member from Service on or after the Normal Retiring Date he shall be entitled to an immediate pension commencing on the day next following the date of retirement and payable to the Member as provided in Rule 15."

If a Member chooses to retire before Normal Retirement Date that Member will cease to make contributions and will of course be entitled to a deferred pension payable at the Normal Retirement Date. However, with the consent of the employer he will have the option, in lieu of those entitlements, to choose to be paid an immediate pension which he a

grees is to be discounted.

"12(B)PENSION ON EARLY RETIREMENT

On retirement of a Member from Service before the Normal Retiring Date then if retirement either occurs with the consent of the Employers not earlier than the attainment of the age of 50 years or is on account of the Member's Incapacity the Member shall have the option (exercisable by notice in writing given to the Trustees not later than the date of retirement) of selecting that in lieu of other benefits an immediate pension shall be payable. The pension shall commence on the day next following the date of retirement and be payable to the Member as provided in Rule 15.

The annual amount of the pension shall subject to Revenue Limitations and to (F) of this Rule be the amount calculated in accordance with (A) of this Rule appropriate to the Member's period of Pensionable Service (or such part of the appropriate amount as the Trustees having regard to the contributions then paid shall determine) reduced by such amount as the Trustees shall determine to have regard to the Member's age at the date of retirement."

If the employer refuses consent the Member has no right to that option.

If in the present case the Company had realised where the granting of its consent was to lead, it might have refused.

(C) which reads:

(C)BENEFIT ON WITHDRAWAL FROM SERVICE BEFORE THE NORMAL RETIRING DATE WITHOUT A PENSION ON EARLY RETIREMENT BEING PAYABLE.

On withdrawal (whether by resignation or dismissal) of a Member from Service before the Normal Retiring Date without a pension on early retirement being payable under (B) of this Rule the Member shall subject to (F) of this Rule have the option of selecting either of the following benefits namely:-

(i)the return of his contributions without interest subject to the deduction of the tax to which the Trustees may be chargeable in respect of such return; or

(ii)a deferred pension to commence on the day next following the Normal Retiring Date (if the Member shall then be living) and to be payable to the Member as provided in Rule 15. The annual amount of the pension shall be:-

(a)the amount appropriate to the Member's contributions, or (b)If withdrawal is on account of ill-health or dismissal otherwise than for fraud or misconduct or in other circumstances if the Employers shall so determine the amount (if greater than (a) above) calculated in accordance with (A) of this Rule appropriate to the Member's period of Pensionable Service (or such part of the appropriate amount as the Trustees having regard to the contributions paid shall determine)."

By letter of the 16th November 1989 Mr Roscoe indicated that he was considering early retirement on the 27th June 1990 and sought information about the value of his pension on that date and the options open to him. After receiving that information he wrote on the 17th January 1990 and asked for permission to retire on the 30th June 1990 but indicated in his last paragraph:

"As expected, the degree of pension discounting applied by the Company is, in my opinion, excessive and I intend to continue with my efforts to bring about changes in this area, but even if these fail, it will not affect my wish to take early retirement."

By letter of the 21st February 1990 Mr Roscoe's request was granted by the Company with regrets, as his contribution to the efforts of the Company had been much appreciated.

In April 1990 salaries were increased and Mr Roscoe sought information on the effect of this upon his pension.

On the 17th May 1990, as we have already said, the Judgment in BARBER was given.

On the 18th May Mr Roscoe wrote to the Company as follows:

"I hereby register my official claim for the same pension benefits as those which would be granted to a woman Scheme Member of the same age, and with the same pensionable service, in line with the recent ruling of the European Courts of Justice in the case brought against the Guardian Royal Exchange by Mr Douglas Barber."

On the 30th June he took early retirement.

On the 27th July 1990 he issued his Originating Application.

In the "pleadings" before the Industrial Tribunal a number of issues were raised by the Company, but Mr Pannick who appears for the Company before us, as he did before the Industrial Tribunal, has elected to fight the case upon one single and easily identifiable question.

It can be stated thus:-

"In the light of the Decision in Barber is the calculation of the Applicant's immediate pension payable from the 30th June 1990 to be that which would be payable if that had been his Normal Retirement Date or is a line to be drawn as at the 17th May 1990 - the date of the decision in Barbe r - and his immediate pension to be calculated in two parts; the first up to the 17th May 1990 upon the basis of the Rules of the Scheme as they now exist; and secondly from that date until 30th June 1990 upon the basis that the latter date was his Normal Retirement Date, so that there would be no actuarial reduction during that period?"

That is the question which we are asked to answer. That answer will affect hundreds of cases already before industrial tribunals involving hundreds of different pensions schemes and no doubt many more to come.

The Industrial Tribunal in this case found no difficulty in interpreting the Judgment in BARBER and decided that the calculation should be made without any discount at all and as if the 30th June 1990 was Mr Roscoe's Normal Retiring Date.

We wish that we had their confidence, but find ourselves unable to agree that BARBER is clear. With respect to the learned Judges at the European Court of Justice we have problems in understanding that Judgment. In so saying we find ourselves in the august company of Sir Nicholas Browne-Wilkinson, the former Vice Chancellor of the Chancery Division and many other learned commentators. Let us explain. There is a dispute about the meaning of that Judgment and therefore a dispute as to the correct European law to be applied. Much may depend upon a proper understanding of the word "entitlement", and difficulties may possibly arise from the differences in language.

Let us break down the award of a pension. As we have already stated there arise rights to benefits under the Rules of a Scheme from the moment of entry. Secondly, there is the right to a pension of some kind, "payable at some date, for some period"; thirdly, there is the right to be paid the pension from a particular date; fourthly there is the method of calculation arriving at the sum which is payable, (it may of course include a lump sum plus annual payments), and that calculation will be based upon the accumulation of years of pensionable service, based upon contributions by employer and employee. There is in effect a crystallisation of rights which have continued throughout membership of the Scheme. The Trustees have been performing their duties upon the basis of those continuing rights of Members to benefits and upon the professional advice of actuaries based upon the existing state of the law. Any one or more of those rights may constitute the issues in a particular case. In the present case it is the method of calculating - the discounting.

The relevant paragraphs of the Judgment in BARBER are 40-45 inclusive. It is the submission of Miss Gill that the correct view is that taken by the Industrial Tribunal that these paragraphs are quite clear and that "entitlement to a pension" means the right to claim a pension. Hence the only affect which these paragraphs have is to prevent those already in receipt of a pension from bringing proceedings to increase that pension. Otherwise claims already made whether or not any payment is also being made, and all future claims should be subject to the affect of the Judgment. In support of this approach it is emphasised that there is no entitlement to a pension until the termination of employment; secondly, that there need be no very complicated actuarial calculations; thirdly, that in some pension schemes there is a surplus which could be used, and lastly, that to prevent a total recalculation of payment would perpetuate the discrimination for up to 40 years.

To that last submission Mr Pannick points out that as from the 17th May 1990 there will be no discrimination in respect of either calculation or right to a pension and that although discrimination has been held to have occurred between 1972 and that date, it is precisely because the European Court recognises that such discrimination was understandable and not culpable that it phrased its Judgment as it did. He comments that if the intention of the European Court had been as simple as is submitted by Miss Gill nothing could have been easier than to say so. It would not have needed six paragraphs.

The contrary argument is that these six paragraphs must be carefully analyzed and full effect given to them.

Paragraph 40 refers to the observations of the Commission and the United Kingdom about the serious difficulties which would occur if the effect of the Decision was retrospective.

Paragraph 41 refers to DEFRENNE v. SABENA

[1976] ICR 547

and the power of the European Court of Justice -

"it may, by way of exception, taking account of the serious difficulties which its judgment may create as regards events in the past, be moved to restrict the possibility for all persons concerned of relying on the interpretation which the court, in proceedings on a reference to it for a preliminary ruling, gives to a provision."

The relevant paragraphs in the Judgement DEFRENNE are 69 to 75 which read:

"69. The Governments of Ireland the United Kingdom have the court's attention to the possible economic consequences of attributing direct effect to the provisions of article 119, on the ground that such a decision might, in many branches of economic life, result in the introduction of claims dating back to the time at which such effect came into existence.

70. In view of the large number of people concerned, such claims, which undertakings could not have foreseen, might seriously affect the financial situation of such undertakings and even drive some of them to bankruptcy.

71. Although the practical consequences of any judicial decision must be carefully taken into account, it would be impossible to go so far as to diminish the objectivity of the law and compromise its future application on the ground of the possible repercussions which might result, as regards the past, from such a judicial decision.

72. However, in the light of the conduct of several of the member states and the views adopted by the Commission and repeatedly brought to the notice of the circles concerned, it is appropriate to take exceptionally into account the fact that, over a prolonged period, the parties concerned have been led to continue with practices which were contrary to article 119, although not yet prohibited under their national law.

73. The fact that, in spite of the warnings given, the Commission did not initiate proceedings under article 169 against the member states concerned on grounds of failure to fulfil an obligation was likely to consolidate the incorrect impression as to the effects of article 119.

74. In these circumstances, it is appropriate to determine that, as the general level at which pay would have been fixed cannot be known, important considerations of legal certainty affecting all the interests involved, both public and private, make it impossible in principle to reopen the question as regards the past.

75. Therefore, the direct effect of article 119 cannot be relied on in order to support claims concerning pay periods prior to the date of this judgment, except as regards those workers who have already brought legal proceedings or made an equivalent claim."

After setting out its reasons for the conclusion in paragraph 42, the Court in BARBER gives that conclusion as follows in paragraph 43:

"In the light of those provisions, the member states and the parties concerned were reasonably entitled to consider that article 119 did not apply to pensions paid under contracted-out schemes and that derogations from the principle of equality between men and women were still permitted in that sphere."

This course of reasoning would seem to indicate that the view of the European Court was that until the 17th May 1990 the Member States and the parties themselves (which must include the Trustees of all the pension schemes) had conducted themselves appropriately under European law and were not culpable. Neither could criticism be made of the actuarial advice.

There then follow the vital paragraphs 44 and 45:

"44. In those circumstances, overriding considerations of legal certainty preclude legal situations which have exhausted all their effects in the past from being called in question where that might upset retroactively the financial balance of many contracted-out pension schemes. It is appropriate, however, to provide for an exception in favour of individuals who have taken action in good time in order to safeguard their rights. Finally, it must be pointed out that no restriction on the effects of the aforesaid interpretation can be permitted as regards the acquisition of entitlement to a pension as from the date of this judgment.

45. It must therefore be held that the direct effect of article 119 of the Treaty may not be relied upon in order to claim entitlement to a pension with effect from a date prior to that of this judgment, except in the case of workers or those claiming under them who have before that date initiated legal proceedings or raised an equivalent claim under the applicable national law."

If one takes the first sentence of paragraph 44 it would seem to indicate that those considerations which would involve "upsetting the financial balance" are to be avoided. In the light of what has gone before in the Judgment itself and in DEFRENNE this would seem to point to any question of revaluing or reassessing the fund.

It is then argued that the second sentence of that paragraph seems to indicate that the right to re-open issues relating to pensions already payable is limited to those cases where proceedings have already been initiated.

In the last sentence of paragraph 44, the " acquisition of entitlement to a pension" is said to refer only to the right to a pension.

If this understanding is correct then paragraph 45 merely re-emphasises the last sentence of paragraph 44.

We hope that we have shown that there are possible arguments about the true intent of the Judgment in BARBER. On the one hand Trustees from the 17th May 1990 can now readjust the capital in their funds and actuarial advice can be given on present known factors. The financial balance can be maintained.

On the other hand although in some of the larger establishments there may be surpluses in some funds which can be utilised, there may be many other instances where the Trustees or their advisers will find that there is insufficient funding and issues of liability and culpability can very well arise, some would say that they certainly will arise.

We hope that we have indicated that we cannot agree with the submission that the intention of BARBER is totally clear. We therefore have decided not to hear the Appeal at this stage.

The next question was whether we should refer issues to the European Court under Article 177 of the Treaty of Rome. The only question which could be referred is that which we have set out above. There are many other questions which we would have liked to have asked in order to provide guidance for the future in the numerous appeals which are almost certain to reach this Court. However it is clear that Article 177 only permits a referral of a question which it is "necessary" to be answered in order to enable us to give judgment.

We were urged by Miss Gill to refer that question. Although as a general rule we have expressed the view that in the absence of agreement, it is for the higher Courts in the United Kingdom to make such references and that the parties are entitled to have reasoned decisions from the higher United Kingdom Courts before issues are referred, we are mindful in the present case that the same or very similar issues have already been referred. We therefore approach this question without any predilection against a referral.

Miss Gill makes a number of submissions, first, that it would be of advantage to the European Court to have a decision from an industrial tribunal. Secondly, that it would be helpful to that Court to have the facts of a particular case before it against which to test its own principles. Thirdly, that the issue in the present case was simple and that it related to employment, whereas the problems in COLOROLL do not. Fourthly, that there were so many questions put in the COLOROLL reference that the simple question in this case might not be answered. Lastly, if we made a reference the answer would be remitted to this Court, which would have control of the case and would be able to give guidance to the many industrial tribunals within this jurisdiction.

We appreciate and accept many of those points and it is because of them and because of the wide and considerable experience of the industrial Members of this Court that we have thought fit to set out our problems at some length.

The Equal Opportunities Commission is representing Mr Neath and Mr Pannick is instructed to represent Hugh Steeper Ltd. It is therefore open to either to bring this case to the attention of the European Court and to emphasise the question which it raises in stark form. As we are not deciding this Appeal, the whole matter must return to us and we will therefore be able to keep control.

Mr Pannick, with his knowledge of the European Court and its procedures, contends that to add any further case to COLOROLL and NEATH would only cause additional delay and that there are already cases from other Member countries also to be heard at the same time. The whole process will become too enormous and the Hearing would be greatly lengthened.

Lastly and perhaps with greatest emphasis, he opposes any reference because of the cost to his clients which he submits may well be and probably would be money wasted.

We have taken the view that for the reasons given above, including the submissions of Mr Pannick, we will not refer any questions to the European Court of Justice at Luxembourg.