Westminster City Council v Haywood and Another

JurisdictionEngland & Wales
CourtQueen's Bench Division (Administrative Court)
Judgment Date22 February 1996
Judgment citation (vLex)[1996] EWHC J0222-2
Date22 February 1996
Docket NumberCO 2545/95

[1996] EWHC J0222-2





Before: The Hon. Mr Justice Robert Walker (Sitting as an Additional Judge of the High Court)

CO 2545/95


Westminster City Council
Jeffrey James Haywood
First Respondent
The Pensions Ombudsman
Second Respondent

MiSS E SLADE QC and Mr C BEAR (instructed by the City Solicitor and Director of Corporate Services, Westminster City Council, London SW1) appeared on behalf of the Appellant.

THE FIRST RESPONDENT did not appear and was unrepresented.

MR A ARDEN QC and Mr A DYMOND (instructed by Paisner & Co, London EC4A 2DQ) appeared on behalf of the second Respondent.


( RSC Order 68 Rule 1)


Thursday, 22nd February 1996






This is an appeal by Westminster City Council ("Westminster") against a determination made and directions given on 25 July 1995 by the Pensions Ombudsman. The first respondent to the appeal is Mr Jeffrey Haywood, the "authorised complainant" who brought the matter before the Pensions Ombudsman. Mr Haywood has taken no part in the appeal, although he has been present in court throughout the hearing. The second respondent is the Pensions Ombudsman himself, who has resisted the appeal. I do not criticize him for doing so. The appeal raises important and difficult questions as to the nature of the Pensions Ombudsman's jurisdiction and powers, on which it was most desirable for me to hear argument from both sides.



The factual situation out of which Mr Haywood's complaint arose is described in the second part (paragraphs 3 to 10 inclusive) of the Pensions Ombudsman's written determination ("the decision"). Since the appeal is on points of law only the following outline of the primary facts is taken from that part of the decision, supplemented by some further undisputed background material as to local authorities' pension, severance and compensation arrangements.


At the end of 1991 Mr Haywood worked as a senior structural engineer in Westminster's Surveyors Department. He was then 49 years of age and a member of the Local Government Superannuation Scheme regulated by the Superannuation Act 1972 and (as they then were) the Local Government Superannuation Regulations 1986 ("the pension regulations").


At the end of 1991 Westminster was seeking quite a large number of "voluntary" redundancies and Mr Haywood was among those considering that course. Mr Haywood's 50th birthday was not far off —12 April 1992 —and on 20 November 1991 he wrote to the Personnel Development Manager mentioning this and asking

"would it therefore be possible for me to be employed until I am 50 to qualify for early retirement and associated benefits?"


This was arranged and Mr Haywood left Westminster's service on 12 April 1992, his 50th birthday.


The age of 50 was important because it was the earliest age at which a local government employee could in any circumstances begin to receive an immediate retirement pension (and a lump sum in lieu of a part of the pension) under the pension regulations. An employee who left service before 50 had to wait until the age of 60 before being entitled to receive either a pension or a lump sum under the pension regulations.


The age of 50 was also of some significance in connection with payments to which employees made redundant by Westminster might become entitled otherwise than under the pension regulations, and in addition to their ordinary statutory redundancy payments. As a matter of terminology Westminster (in the relevant policy document) referred to "severance" payments on redundancy before the age of 50 and "compensation" payments on redundancy at or after 50. More importantly, severance payments were simply lump sums whereas compensation payments comprised both lump sums and additional periodical payments. All severance and compensation payments came from the general rate fund, not from separate funds which are subject to the pension regulations (and are held on statutory trusts). But periodical payments of compensation to those made redundant after 50 were in practice paid together with their pensions, and both payments were (as from age 55) enhanced by index-linking under the Pensions (Increase) Act 1971 as amended. So to the non-expert observer they closely resembled pensions.

As the decision records, the choice quoted to Mr Haywood was between —

(i) on redundancy under 50 -

(a) a deferred pension of £6,890 p.a and lump sum of £20,690 under the pension regulations;

(b) statutory redundancy of £11,200; and

(c) a severance lump sum of £21,000; and

(ii) on redundancy at 50 -

(a) an immediate pension of £7,376 p.a and lump sum of £22,129 under the pension regulations;

(b) statutory redundancy of £11,544; and

(c) a compensation lump sum of £8,509 and a compensation annuity of £3,950 p.a.


These figures are not completely comparable because the first quotation ((i) above) was prepared in November 1991 and Mr Haywood later had a salary increase of about £17 per month, but the effect of that is negligible. The Pensions Ombudsman (in paragraph 3(b) of the decision) aggregates the lump sums and periodical payments at (ii) above. He adds,

"No reference was made to any judicial proceedings or to the possibility that the quotations might be affected by lack of authority".


This leads on to the issues of ultra vires which (together with issues of jurisdiction) lie at the heart of this appeal. It is not only in connection with interest-rate swaps that problems have arisen in relation to local authorities' statutory powers (and in particular, the scope of the powers conferred by section 111 of the Local Government Act 1972 to do whatever is incidental to the discharge of their functions). A similar question arose in relation to the "enhanced voluntary severance scheme" established by the North Tyneside Metropolitan Borough Council, and this was referred to the Court by the auditor. The case came before the Divisional Court on 16 October 1991 ( Allsop v North Tyneside MBC (1991) 90 LGR 462, 464). On a preliminary issue, the Divisional Court held that the local authority had no power under section 111 or section 112 of the Local Government Act 1972 to make payments in excess of those permitted by section 81 of the Employment Protection (Consolidation) Act 1978 or by the regulations specifically relating to redundancy and premature retirement. There was then an appeal to the Court of Appeal which was dismissed on 3 March 1992 ( Allsop v North Tyneside MBC 1992 ICR 639; (1992) 90 LGR 462, 483).


In paragraph 4 of the decision the Pensions Ombudsman at least inclines to the view —there is an issue as to whether it is a finding of fact —that Mr Haywood received reassuring advice (from Westminster's superannuation section) to the effect that the litigation posed no threat "to the lump sum and pensions of those people taking premature retirement due to redundancy".


Following the decision of the Court of Appeal Westminster's director of personnel issued a special bulletin dated 11 March 1992. The bulletin began as follows (part of this being quoted in paragraph 6 of the decision),

"Following the Allsop v North Tyneside case about the lawfulness of severance payments I wrote to staff last October to say that under special powers available to London Boroughs [Westminster's] scheme was to continue.

Although the North Tyneside case has no direct bearing on [Westminster] the Audit Commission have now issued guidelines about the way in which London councils can lawfully make severance payments, and we have had to modify our arrangements to comply.

The major changes are as follow:-

We cannot operate a fixed scheme, so we have had to withdraw the scheme from the Personnel Handbook.

We can use the scheme but purely as a guide and must consider each case on its merits and link any payment to an assessment of potential loss.

We cannot make severance payments as well as statutory redundancy payments to staff who have no rights to ill health benefits under the Local Government Superannuation Scheme or who have less than one year's service."


The special powers referred to are conferred by section 31 of the London County Council (General Powers) Act 1921, ("the 1921 Act"), as applied to Westminster by the Greater London Council (General Powers) Act 1968. The limit set by section 31(1) by reference to ill-health benefit explains the reference in the bulletin to ill-health benefits under the Local Government Superannuation Scheme. As I have said, Mr Haywood retired on his 50th birthday, 12 April 1992. At the end of January 1993 he became aware from television news that his pension (in common with those of up to 600 others) might be reduced. He then received a letter (dated 8 February 1993) from Westminster's Finance Department notifying him that

"your gross pension will be reduced by approximately £158 per month."


This reduction came exclusively out of Mr Haywood's monthly compensation payment (initially £329.16) from the general rate fund, and not out of the monthly pension payment (£614.71) from funds subject to the pension regulations. The letter dated 8 February referred to the North Tyneside case and said "Whilst the circumstances of that case were different from those of this Council, it brought into focus the whole question of severance payments and how they are...

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