R (on the application of British Telecommunications Plc) v HM Treasury
| Jurisdiction | England & Wales |
| Judge | Sir Terence Etherton MR,Lord Justice Henderson,Lady Justice Nicola Davies DBE |
| Judgment Date | 21 January 2020 |
| Neutral Citation | [2020] EWCA Civ 1 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: C1/2018/2925 |
| Date | 21 January 2020 |
[2020] EWCA Civ 1
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Administrative Court
Hamblen LJ and Whipple J
Royal Courts of Justice
Strand, London, WC2A 2LL
THE MASTER OF THE ROLLS
Lord Justice Henderson
and
Lady Justice Nicola Davies DBE
Case No: C1/2018/2925
and
Dinah Rose QC, Fraser Campbell and Celia Rooney (instructed by CMS Cameron McKenna Nabarro Olswang LLP) for the Appellant
Marie Demetriou QC, Tim Johnston and Patrick Halliday (instructed by the Government Legal Department) for the Respondent
Jonathan Hilliard QC and Iain Steele (instructed by Allen & Overy LLP) for the Intervener
Hearing dates: 11 & 12 December 2019
Judgment Approved
Sir Terence Etherton MR, Lord Justice Henderson and
This is an appeal by British Telecommunications plc (“BT”) from the order dated 28 November 2018 of Hamblen LJ (as he then was) and Whipple J, sitting as a Divisional Court of the Queen's Bench Division (“the Divisional Court”), dismissing BT's claim for judicial review of the decision of Her Majesty's Treasury to implement full indexation of the guaranteed minimum pension (“GMP”) payable to members of public service pension schemes (including the Principal Civil Service Pension Scheme (“the PCSPS”)) who reach State pension age between December 2018 and April 2021.
The decision was given effect by a direction under section 59A of the Social Security Pensions Act 1975 (“SSPA 1975”). The effect of rule 10.2 of Section B of the BT Pension Scheme (“the BTPS”), which is the largest private sector funded occupational scheme in the country, was that the indexation for relevant members of the PCSPS (a pension scheme for civil servants) was carried across to relevant members of Section B of the BTPS (a private occupational pension scheme). The origins of rule 10.2 can be traced back to the separation of the Post Office from the rest of the civil service, well before the telecommunications business of the Post Office was moved to a new statutory corporation, British Telecommunications, whose business was privatised in 1984, when its assets and liabilities were transferred to BT. BT says that the Treasury's decision for public service pensions will increase BT's liabilities under the BTPS by approximately £120 million, unlike any of its competitors, even though that was not the intention behind the direction under section 59A.
BT's complaint is that the Treasury could and should have implemented indexation for members of the PCSPS in a way that would have avoided the knock-on effect of benefiting members of the BTPS under rule 10.2 of Section B of the BTPS. BT says that could have been done in one of various ways that had been suggested to the Treasury by BT. BT further contends that the reasons why the Treasury rejected BT's suggestions were based on misunderstandings of the law, both in relation to the vires of the Government to do what BT suggested and as to whether the BTPS Section B members have a legitimate expectation, amounting to a property right protected by Article 1 of the First Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms (“A1P1”), that they will enjoy the same pension increases as are granted in the public sector under the various statutory provisions mentioned in rule 10.2, namely the Pensions (Increase) Act 1971 (“PIA 1971”) and SSPA 1975 sections 59 and 59A (together “the Increases Legislation”).
Statutory and factual background
As will be seen from the Discussion section of this judgment, the outcome of this appeal turns on the validity of two findings of fact made by the Divisional Court. For the reasons we set out there, we conclude that the Divisional Court was entitled to make those findings of fact and, accordingly, the appeal is dismissed.
The judgment of the Divisional Court sets out the statutory and factual background in very great detail over 85 paragraphs and 28 pages. In view of our decision on the two issues of fact, we do not consider it is necessary or appropriate for us to set out the background in the same extensive way.
The Divisional Court explained the statutory background to the GMP, increases to GMPs, statutory increases to public service pensions, the abolition of the additional State pension and the statutory framework for the PCSPS in [7]–[26] of their judgment, based upon a note agreed by the parties. That part of the Divisional Court's judgment is reproduced in the annex to our judgment.
By virtue of rule 10.2 of Section B of the BTPS the effect of the decision of the Treasury was to increase pre-May 1988 GMP of BTPS Section B members. So far as concerns their post-April 1988 GMP, any future increases under the Increases Legislation providing for indexation above the 3% required by section 109 of the Pension Schemes Act 1993 will also carry across to BTPS Section B members. Rule 10.2 is the only provision in Section B of the BTPS providing for increases in GMP.
So far as concerns the factual background, this was set out by the Divisional Court in [27] – [86] of their judgment. Reference should be made to that part of the Divisional Court's judgment for a full account of the facts which lie behind this litigation. We shall confine ourselves to the following very brief account, some of which we gratefully take directly from the Divisional Court's judgment. Some of the documents to which we refer are addressed, summarised and quoted in greater detail in the Discussion section below.
Following the abolition of the additional pension and the introduction of the new State pension, on 4 September 2015 there was a ministerial submission which proposed an interim solution providing all public service pensioners reaching State pension age between April 2016 and November 2018 with full indexation of the GMP portion of their pension.
Around that time BT raised its concerns about the potential read across impact on the BTPS. Following initial correspondence there was a meeting on 3 February 2016. On 11 February 2016 BT's Pensions Risk Director, Mr Paul Rogers, wrote to the Treasury setting out the impact that any ministerial direction would have in respect of the BTPS. The letter proposed alternatives to such a direction, such as the State continuing to meet GMP increases for public sector scheme members outside of the PCSPS framework or introducing a statutory override for private sector schemes.
On 1 March 2016 the Government announced the interim solution of fully indexing the GMP of public sector workers reaching State pension age on or after 6 April 2016 and before 6 December 2018. The Government said that it expected to launch a consultation on how best to address the implications of changes resulting from the introduction of the new State pension.
On 8 March 2016 the then chairman of the BT Group, Sir Michael Rake, wrote to the Treasury regarding that announcement. He explained that, if implemented by way of a ministerial direction (under section 59A), this would substantially increase BT's liabilities in respect of the BTPS. He requested the Treasury to consider making the change not by ministerial direction, but by another way such as a change to the rules of the PCSPS or the State continuing to pay the increases directly.
On 17 March 2016 there was a submission by Officials to the Chief Secretary in relation to BT's proposals. On 21 March 2016 there was a meeting between the Treasury and BT. Following the meeting the Treasury sent an email to BT explaining why the Treasury considered that the option of amending the rules of the PCSPS was not feasible. Following further emails from BT, on 24 March 2016 the Chief Secretary and the Minister for Pensions replied to Sir Michael Rake's letter of 8 March 2016. The letter stated that Treasury officials had given BT reasons why the proposals in the letter could not be taken forward. It also stated that an option would be for the issue of the impact on schemes like that of BT to be included in the government's consultation on the long-term solution to GMP indexation and equalisation for public servants.
The interim solution announced by the Government on 1 March 2016 was achieved by issuing a direction on 6 April 2016 under SSPA 1975 s.59A to ‘switch back on’ the indexation otherwise ‘switched off’ by section 59(5). BT says that, by virtue of rule 10.2 of Section B of the BTPS, the effect of the direction was to increase BT's liabilities by around £200 million.
On 28 November 2016 the Treasury published its consultation, inviting responses on the question of whether public service pension schemes should pay full indexation on GMP, earned while a member of a public service pension scheme, for someone who reaches State pension age after 5 December 2018. Three specific options being considered, upon which the Treasury sought responses, were: (1) full indexation; (2) a case-by-case option, under which consideration of the need for “top up” indexation for public sector pensioners would be considered on a case by case basis; and (3) a conversion option, under which the GMP elements of a public sector pension would be converted into ordinary scheme benefits.
The consultation made clear that the Government would be interested in views on solutions other than the three identified options. The consultation also said it was keen to hear from those private sector organisations whose pension schemes would be impacted by any of those policy options, as well as from representatives of their scheme members and from their pension fund trustees. It invited responses from them as to what specific...
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