R Fleet Maritime Services (Bermuda) Ltd v The Pensions Regulator
| Jurisdiction | England & Wales |
| Judge | Mr Justice Leggatt |
| Judgment Date | 21 December 2015 |
| Neutral Citation | [2015] EWHC 3744 (Admin) |
| Docket Number | Case No: CO/5667/2014 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 21 December 2015 |
[2015] EWHC 3744 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Leggatt
Case No: CO/5667/2014
David Reade QC (instructed by Mayer Brown LLP) for the Claimant
Adrian Lynch QC (instructed by the Pensions Regulator) for the Defendant
Hearing dates: 11–12 November 2015
Introduction
The question in this case is whether seafarers employed by the claimant fall within the territorial scope of the Pensions Act 2008, as the Pensions Regulator maintains, so as to qualify for automatic enrolment into a pension scheme in accordance with the Act. This depends on the meaning of section 1(1)(a), which brings within the scope of the Act a worker "who is working or ordinarily works in Great Britain under the worker's contract".
The Facts
There is no dispute about the underlying facts and the following summary is based on a statement of facts which the parties have agreed.
The claimant, Fleet Maritime Services (Bermuda) Limited (hereafter "the Employer"), is a company incorporated in Bermuda. The Employer is a wholly owned subsidiary of Carnival plc, an English company. Carnival owns the ships which trade under the names of P&O Cruises and Cunard. Most of the ships are registered in Bermuda. The Employer employs the crew (referred to in this judgment as the "seafarers") who work on these ships. The Employer uses a Guernsey based company as its payroll and administrative vehicle and has no place of business in the UK.
The seafarers live on board the cruise ships to which they are assigned during any particular "tour of duty". Each tour of duty is typically twelve weeks but can be up to six months, followed by six or twelve weeks of leave. All the cruise ships spend a significant majority of their time outside UK territorial waters.
The Employer has provided the Pensions Regulator with examples of the most commonly used contracts under which the seafarers work. Relevant extracts from those contracts are set out in an annex to this judgment.
Some of the seafarers reside in the UK and some reside outside the UK. The seafarers are mostly paid in British pounds, though some of those working on Cunard ships are paid in US dollars where that is the currency used by that particular ship.
As regards tax, the seafarers who reside in the UK and whose duties are wholly or mainly outside the UK may be able to claim Seafarers' Earnings Deduction on income that would normally be taxable in the UK. The seafarers are not automatically entitled to the Seafarers' Earnings Deduction as this will depend on their individual pattern of absence from the UK, and they must apply to HMRC for such tax relief.
The Employer is exempt from making any National Insurance contributions on behalf of those seafarers who live in the UK because the company has no place of business in the UK. Pursuant to regulations 115–121 of the Social Security (Contributions) Regulations 2001, seafarers are personally liable to pay National Insurance contributions if they are domiciled or resident in the UK and their contract was entered into in the UK (in circumstances where Carnival, which owns the ships, has a place of business in the UK).
The Pensions Act 2008 introduced a system of "automatic enrolment" into pension arrangements within Great Britain. 1 The effect of the legislation is to require an employer to automatically enrol an eligible "jobholder" into an "automatic enrolment scheme" which satisfies specified requirements, unless the jobholder is already an active member of a qualifying pension scheme under the Act. There are provisions which enable jobholders to opt out of automatic enrolment.
A "jobholder" is defined in section 1(1) of the Act as a "worker":
"(a) who is working or ordinarily works in Great Britain under the worker's contract,
(b) who is aged at least 16 and under 75, and
(c) to whom qualifying earnings are payable by the employer in the relevant pay reference period."
A "worker" means an individual who has entered into or works under a contract of employment or any other contract by which the individual undertakes to do work or perform services personally for another party (referred to in the Act as the "employer"): see section 88.
Enforcement
The Pensions Regulator is responsible for enforcing the automatic enrolment obligations placed on employers by the Act. It has published detailed guidance explaining its understanding of how the relevant statutory provisions operate. Under section 35 of the Act the Regulator has the power to issue a compliance notice directing an employer to take steps to remedy a contravention of one or more of its duties under the Act. If the employer does not comply with such a notice, the Regulator may issue a penalty notice which imposes a financial penalty for non-compliance or which is to take effect on an escalating basis if non-compliance continues after a specified date (sections 40 and 41).
The Regulator may review a notice on the application of an employer (section 43). An appeal lies to a tribunal if an application for a review of a penalty notice does not lead to its withdrawal (section 44). An employer who wilfully fails to comply with a duty of automatic enrolment is guilty of a criminal offence (section 45).
The Regulator's decision in this case
The duties on employers under the Act are being implemented in stages between October 2012 and February 2018. The stage at which an employer becomes subject to the duties depends on the number of workers it employs. It is not in issue that, if the Regulator is correct in its interpretation of section 1(1)(a), the Employer now has automatic enrolment obligations towards many of its seafarers.
On 10 July 2014 the Regulator sent a letter to the Employer to say that it had reached the view that certain categories of worker employed under contracts with the Employer fall within section 1(1)(a). In particular, the Regulator expressed the following views:
i) Where a worker lives in the UK but works on a British or foreign registered vessel spending several weeks away working in foreign waters and joins and leaves that vessel from a port within the UK, they should be assessed as ordinarily working in the UK, even though most of their tour of duty might be spent outside the UK.
ii) Where a worker lives in the UK, begins and ends their tour of duty outside the UK and is working under a permanent contract of employment in similar form to the contracts sent as examples to the Regulator, there is evidence in relation to travel and other arrangements at the beginning and end of a tour of duty to support the view that their work begins and ends in the UK and they should therefore be assessed as ordinarily working in the UK, even though most of their tour of duty might be spent outside the UK.
iii) Where a worker lives in the UK, begins and ends their tour of duty outside the UK and is working under a fixed term contract of employment in similar form to the contracts sent as examples to the Regulator, there is not sufficient evidence to support the view that their work begins and ends in the UK and therefore they are not ordinarily working in the UK. 2
The Regulator has subsequently confirmed that it does not consider that any seafarers working for the Employer who do not live in the UK fall within section 1(1)(a) of the Act.
The letter dated 10 July 2014 from the Regulator was accompanied by a compliance notice. The Employer requested a review of that notice. The outcome of the review, communicated in a letter dated 10 September 2014, was that the Regulator affirmed its earlier decision to issue the compliance notice.
These proceedings
In these proceedings the Employer seeks judicial review of the Regulator's decision to uphold the compliance notice. Permission to proceed with the claim was initially refused on paper on the ground that under the statutory scheme the appropriate procedure for challenging an adverse decision of the Regulator is to appeal to a tribunal under section 44 of the Act following a refusal to withdraw a penalty notice. Following an oral hearing, however, Mr Justice Mitting gave permission to proceed. He considered it appropriate for the Employer to seek clarity as to the law through judicial review rather than wait for the service of a penalty notice in circumstances where failure to comply with a duty of automatic enrolment under the Act potentially gives rise to criminal liability.
The issue for the court
The essential issue raised by the claim is whether or when a seafarer engaged by the Employer to work on a ship which spends all or most of its time outside Great Britain "ordinarily works in Great Britain under the worker's contract" within the meaning of section 1(1)(a).
In English law the meaning and effect of legislation is a question of law for the court. No deference is afforded to the interpretation of an administrative agency charged with enforcing the legislation, unless the legislation itself (as interpreted by the court) so requires. 3 Although the Pensions Act 2008 gives the Regulator powers to issue compliance notices and penalty notices if the Regulator "is of the opinion" that the person to whom the notice is issued has failed to comply with a relevant duty, it does not other than in this procedural context give any special status to opinions expressed by the Regulator – for...
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