Secretary of State for Work & Pensions v Yates

This is the Secretary of State’s appeal against a decision of Mr Commissioner Mesher (as he then was) dated 1 July 2008. Permission to appeal was granted by the Commissioner because of the importance of the legal principle involved.

The issue in short concerns the circumstances in which, under the social security legislation, a recipient of a “Category B” retirement pension who is resident abroad can take advantage of increases in rates arising under up-rating orders. Such orders, normally made annually, are designed to increase rates to reflect general increases in prices. However there are special rules for those ordinarily resident abroad, who are generally disqualified from the benefit of annual increases in retirement pension, subject to exceptions: Social Security (Persons Abroad) Regulations 1975 (“the Persons Abroad Regulations”). The issue is whether, as the Commissioner found, the claimant fell within one of those exceptions.

The appeal is by the Secretary of State. Unfortunately, the claimant died in January 2008, before the Commissioner’s decision was given. Her step-son, who had presented her case throughout the proceedings, has continued to represent her with the agreement of her executors. They have not appeared before us, but have written asking for the decision to be upheld for the reasons given by the Commissioner. I am grateful to Mr Kolinsky, who appeared for the Secretary of State, for his skilled explanation of these difficult provisions, and his fair presentation of the issues.

Mr Yates was born on 2 March 1911 in England. On 2 March 1976, at the age of 65, he became entitled to a “Category A” retirement pension, and a “graduated retirement benefit” (“GRB”). In 1976 he emigrated to Canada. As a consequence, his pension and GRB were frozen at the November 1975 rate, in accordance with the general rule.

On 8^th September 2001 he married the claimant, Mrs Yates. She was a Canadian citizen, and had never visited this country. She also was over pensionable age at that time, and thus became entitled to a Category B retirement pension from the week following the marriage. That was also calculated at the November 1975 rate. That was confirmed by a decision of the Secretary of State on 22^nd April 2002.

On 25 May 2002, Mr Yates died. As his widow Mrs Yates became entitled to a higher weekly rate of Category B pension (matching the weekly rate of a Category A pension), together with the equivalent of half his GRB. This was confirmed by a decision dated 28^th June 2002. The Department’s calculations were again based on November 1975 rates.

Mrs Yates appealed to the appeal tribunal, which gave its decision rejecting the appeal on 19^th April 2006. The very long delay was partly attributable to an argument by the claimant based on alleged discrimination under Article 14 of the European Convention on Human Rights. The same point was under consideration in another case (R(Carson) v Secretary of State for Work and Pensions), which was decided by the House of Lords in favour of the Secretary of State in May 2005 ([2005] UKHL 37; [2006] 1 AC 173). This issue has still not been finally resolved. A reference in the same matter is due to be heard by the Grand Chamber of the European Court of Human Rights. We are not directly concerned with the human rights aspect, being bound by the House of Lords decision. But the Secretary of State accepts that, if his appeal succeeds, the case should be remitted to the Upper Tribunal so that the matter can be reviewed in the light of the final decision of that court.

There was further delay before the Commissioner, for which he apologised. His task was not made easier by the need for written arguments to be exchanged between the Department’s representative (for which several extensions had to be given) and the claimant’s step-son in Canada, who was representing her. The final decision was issued on 1^st July 2008. The Commissioner agreed with the Department that Mrs Yates’ entitlement to pension and GRB at the time of her marriage in September 2001 was properly based on the November 1975 rates. However, he held that for the remainder of the up-rating year following her husband’s death in May 2002, and thereafter, she was entitled to be paid by reference to the rates current in that year. The Secretary of State appeals.

The precise figures are not important for the discussion of the legal issues. It is sufficient to note, by way of illustration, that Mr Yates’ basic Category A pension, at November 1975 rates, was only £13.30, a week as compared to the equivalent 2002 rate of £75.50. The difference reflects the movement in general prices since 1975, the most significant increases arising in the early years. His GRB represented a relatively small addition to his weekly rate of pension (£1.18 at November 1975 rates).

Most of the relevant provisions are to be found in the Social Security Contributions and Benefits Act 1992 (“the 1992 Act”). That was a consolidation Act, and reproduced a number of provisions formerly in the Social Security Act 1975 (“the 1975 Act”). Unless otherwise stated, references in what follows are to the 1992 Act.

The right to a Category A retirement pension arises from a claimant’s own contributions (s 44). A Category B pension is given to a married person “by virtue of the contributions of the other party to the marriage”; the claimant must also have reached pensionable age (s 48A). The rate is specified as a single weekly figure by Schedule 4 Part 1 of the 1992 Act. The right continues following the death of the spouse, but at a different, higher weekly rate corresponding to the basic rate of Category A pension, as fixed by section 44 (s 48A(4)).

Rights to GRB were derived from a different source, the National Insurance Act 1965, sections 36 to 37. GRB is not part of the modern scheme under the 1992 Act, but former entitlements were preserved by regulations made under the 1975 Act. By section 36 of the 1965 Act, GRB was payable to a person over pensionable age, entitled to a retirement pension; it took the form of an increase in the weekly rate of the retirement pension, calculated by reference to his “graduated contributions”. On her husband’s death, Mrs Yates became entitled to an amount equivalent to half his GRB, by virtue of section 37.

The Commissioner noted the differences between statutory regime for GRB and that for Category B pension, but concluded that for the purposes of the Persons Abroad Regulations the same issue arose (Decision para 31-3). His reasoning in that respect has not been challenged by either side before us. Since the additional amount is relatively small, and in order to avoid further complicating the matter, the ensuing discussion will be confined to Category B, on the understanding that the treatment of GRB will follow the same approach.

Provision for “up-rating” of benefits was originally introduced by the 1975 Act. The first order was made in July 1975 and came into effect in November 1975. The working of the system was described in Metzger v DHSS [1977] 3 All ER 444, in which Sir Robert Megarry V-C took the opportunity to express his views on the statutory language:

For present purposes it is sufficient to adopt the Commissioner’s helpful summary of the sequence of legislation dealing with up-rating in general:

Category A and B pensions are included in the list of benefits subject to the duty under section 150. The section is also treated as applying to GRB (Social Security (Graduated Retirement Benefit) (No 2) Regulations 1978, reg 2).

Section 113(1) of the 1992 Act provides, subject to regulations, a general disqualification from benefits for those absent from the UK:

is absent from Great Britain....”

As I have said, the relevant Regulations are the Social Security (Persons Abroad) Regulations 1975. Regulation 4 removes the section 113 disqualification for certain benefits, including retirement pension and GRB. But that in turn is subject to Regulation 5 which restores the disqualification in certain specified cases, defined by reference to whether the claimant is “ordinarily resident in Great Britain immediately before the appointed date”. The “appointed date” for these purposes is the date fixed for each up-rating order to come into effect.

To understand the Commissioner’s reasoning and the submissions of the Secretary of State, it is necessary to set out the relevant parts of the regulations in full:

The central issue relates to the position immediately following the date of Mr Yates’ death in May 2002. The Secretary of State submits that the only relevant time for assessing whether the conditions are met in any year is the time immediately before the appointed date for the up-rating order for that year; and that the Commissioner fell into error by reconsidering the question by reference to the position at 27 May 2002, when Mr Yates died. Before considering that issue in more detail, it is helpful to identify the common ground as between the Commissioner (whose reasoning I take to have been implicitly adopted by the claimant) and the Secretary of State.

It has never been in dispute that Mr Yates’ Category A pension and GRB were correctly calculated by reference to November 1975 rates. The reasons for this are not discussed in the decision. I take it to be because, as a non-resident, he was disqualified from benefiting from any subsequent up-rating orders by virtue of paragraph 5(3)(c). He did not fall within (a), (aa) or (b), but, (under (c)), viewed at the appointed date of each subsequent up-rating order, he had become entitled to a retirement pension before that date.

Turning to Mrs Yates, it is common ground, as I understand it, that, when she first became entitled to Category B pension, following her marriage on 8^th September 2001, she was disqualified from the enhancement attributable to the current up-rating order under paragraph (aa). That is because she was then a married woman, and immediately preceding the appointed date for that order (April 2001), her husband had been entitled to a Category A pension and was not ordinarily resident. As the parenthesis to (aa) makes clear, it did not matter that she was not married to him at that date.

It also seems to be accepted that the same process of reasoning can be applied retrospectively in relation to every up-rating period back to 1975. Viewed as at September 2001, she was a married woman, whose husband, immediately before the appointed date of any of the twenty-six or so up-rating orders since 1975, had fulfilled the same conditions of non-residence and entitlement to pension. Again it does not matter that she was not married to him at the time of any of those orders. In the Commissioner’s words:

That (at first sight, somewhat surprising) exercise is necessary to achieve the statutory purpose of in effect freezing her entitlement at the same date as that of her husband. It would not be enough to disqualify her from enhancements attributable to the 2001 and 2002 orders. That would simply take one back to the base established by the 2000 order. As the Commissioner explained:

Finally, it is agreed that at 8^th April 2002 (the effective date of the 2002 up-rating order) Mrs Yates continued to fall within (aa), as a non-resident married woman whose husband, immediately before that date, had fulfilled the conditions of non-residence and entitlement to Category A pension. Accordingly, she was disqualified from receiving any enhancement to her Category B pension benefit attributable to that up-rating order. Again the same exercise can be applied to all the years since 1975. Accordingly, there is no dispute that at that stage her pension was correctly treated as “frozen” at November 1975 rates.

I then come to the dispute in relation to the position in May 2002, following Mr Yates’ death.

The Secretary of State submits that her status under (aa) of the Regulations was fixed at the time of the up-rating order, and remained unchanged until the next up-rating order in April 2003. By that time she fell under (b) as a person who was a widow immediately before the appointed date for that order, and whose spouse had died before that date. Accordingly, he says, she continued to be disqualified from any enhancement to Mrs Yates’ Category B pension attributable to that up-rating order, and (presumably, although the basis is less clear) all preceding orders.

The Commissioner did not agree. He held that it was necessary to consider separately her position in May, immediately following her husband’s death, when she became entitled to the higher rate of a widow’s pension. At that time she did not fall within either (aa) (because she was no longer a married woman), or (b) (because, although she was a widow, her husband had not died before the 2002 appointed date). Accordingly she fell within (c).

The consequence, as he found, was that for the purposes of calculating her entitlement at that stage, she was only disqualified in respect of any up-rating order since she first became entitled to a pension in her own right, there being nothing in (c) to tie her disqualification to the position of her husband. The Commissioner explained:

The Secretary of State, as I understand it, does not challenge that view of the effect of paragraph (c) if it applied. The arguments are over whether it applied. Before considering those arguments, in order to do justice to the Commissioner’s reasoning, I should quote the relevant passage in full:

As noted at the end of paragraph 18, there appears to have been no dispute about the application of paragraph (b) from April 2003 onwards.

Mr Kolinsky submits that the Commissioner was wrong to focus attention on the position in May 2002. As indicated by its introduction, the function of paragraph 5(3) is to ascertain the extent of the disqualification in relation to each up-rating order by reference to the situation “immediately before the appointed date”. The position is then fixed in relation to that up-rating order unless the Claimant becomes ordinarily resident in Great Britain, even though the benefit is calculated and paid on a weekly basis. Following the death of Mr Yates, the Claimant’s rate of benefit had to be adjusted to take account of the fact that she was no longer a married woman, but there was no need to reconsider the position under the Persons Abroad Regulations, because her status for the purpose of that annual up-rating order had already been established.

The difficulty with that simple approach, as I see it, is that it tells only part of the story. The drafting of paragraph 5(3) leaves an unresolved tension between the introduction and parts of what follows, in particular sub-paragraph (aa). It is true that the introduction directs attention to the position at the appointed date for the particular order. If one stopped there, the natural reading would be that the position at that date governs the application of the paragraph for the whole period of that up-rating order, subject only to the possibility of the claimant becoming ordinarily resident during that period. That focus is also reflected in the opening words of paragraphs (a) and (b).

However, (aa) has a different emphasis. The question whether the claimant is a married woman is not linked to the appointed date or any other specific date. On the contrary, the appointed date is made relevant only to determining the position of the husband. Further, since it is provided that this question can be answered without regard to whether they were married at that date, it follows that it may refer to a different, earlier date. As has been seen, it is that difference which enabled the Secretary of State to determine that, on Mrs Yates’ marriage in September 2001, she was subject to the disqualification by reference to her husband’s position at the appointed day for the 2001 order in April, and indeed at all earlier appointed days back to 1975.

The tension may have something to do with the statutory history. As the Commissioner explained (para 23ff), sub-paragraph (aa) was part of amendments made in 1994. Their purpose was to regularise certain over-payments made as a result of what was thought to be a mis-interpretation of the provision, and to clarify the position for the future. The thinking behind the change was explained in a letter dated 23 March 1994, and enclosed paper, for the Social Security Advisory Committee. Apart from regularising past payments, the proposed amendment would, it was said -

The Commissioner took some comfort from the fact that the Department at that time seemed to have regarded subparagraph (c) as relevant to a case such as the present. However, he rightly accepted that the Department’s historic view of the interpretation of the existing regulation is not in any way binding on anyone. On the other hand, in construing the amendment, I think it is legitimate for us to have regard, so far as it assists, to the prior statement as to the purpose of the amendment, given in a formal letter on behalf of the Secretary of State who would be responsible for making it. Whether it achieved that purpose is of course a different matter.

I have not found this an easy question to resolve. I see the force of the Commissioner’s interpretation, on a strict reading of the wording of the regulation. However, it makes no sense in practical terms. The general statutory policy (under section 113) is to deprive those absent from the country from any entitlement to such benefits, but to restore it only to the extent that Regulations provided. It is hard to see any reason for restoring the benefit for husbands at rates frozen by reference to the time when they left the country, while allowing a more generous rate for their wives, whose entitlement is equally dependent on their husbands’ contributions. There is therefore a strong incentive to read any ambiguity in the Regulations so as to accord with the evident policy intention.

I think Mr Kolinsky is correct in principle to read the introduction as governing the scheme of paragraph 5(3). Disqualification from the benefit of up-rating is generally treated as applying for the whole of the period of the order, based on the position at the appointed date. In this context the ordinary “week by week” approach is displaced. The difficulty arises because the 1994 draftsman inserted sub-paragraph (aa) to deal with a particular problem, without sufficient regard to its relationship to the paragraph as a whole. However, the drafting defect should not be allowed to disrupt the scheme of the paragraph. The operation of the sub-paragraph should be limited to what is necessary to achieve its purpose.

The only date, other than the appointed date, when it is necessary to apply sub-paragraph (aa) is when a woman becomes entitled for the first time to a Category B pension on her marriage. Sub-paragraph (aa) provides the means of establishing her status under the current and previous up-rating orders, until the appointed date for the next order. That is its agreed effect in relation to Mrs Yates’ marriage in September 2001. There is no similar requirement in respect of the change of circumstances in May 2002, on her husband’s death. Although she changed from married woman to widow, she remained entitled to the same category of pension, albeit at a different rate. There was no reason to revisit the basis of her disqualification under the Persons Abroad Regulations.

For those reasons, I have reached the conclusion that the Commissioner was wrong to attempt to redetermine Mrs Yates’ status under the regulations as at May 2002. Her status remained as it was at the appointed date in April. Accordingly, paragraph (c) was not relevant.

That is sufficient to decide the appeal. However, I have some doubt in any event whether the Commissioner’s interpretation of the effect of sub-paragraph (c) is itself correct. As appears from the passage quoted in paragraph 29 above, he interpreted it as “preventing the lifting of the disqualification” only in relation to up-rating orders coming into force after the date of her own first pension entitlement (rather than that of her husband). That was because sub-paragraph (c), unlike sub-paragraph (aa), refers only to the pension of the claimant, and makes no reference to the historical entitlement of her spouse.

At first sight that seems correct. However, a similar argument could be made in respect of sub-paragraph (b), as it applied from April 2003, although no issue has been taken as to the Department’s approach in that respect. That also lacks any express link to the history of the husband’s pension entitlement; the only reference to him is to the date of his death. To my mind, it provides no better reason than (c) for treating the rate of her pension as frozen by reference to the date of his first entitlement.

I agree, however, that it would be very odd if the fact of his death altered radically the level of rates by reference to which her pension is calculated. The answer may be that once the disqualification status of a particular pensioner has been established in relation to current or previous up-rating orders, that continues from year to year so long as the particular form of pension falls within one of the relevant sub-paragraphs. Thus, in this case, the level of rate for her pension was settled following her marriage under sub-paragraph (aa), disregarding up-rating orders since 1975. That then provided the base for the following year, and so on. On that view, it would not be necessary to find in each of the sub-paragraphs a separate basis for linking her pension to her husband’s entitlement. The same approach could also be applied to sub-paragraph (c), and, if correct, would be another reason for allowing the appeal. However as the point has not been taken by he Secretary of State before us, I express no concluded view.

My first acquaintance with the Persons Abroad Regulations has not been a happy experience. The drafting is lamentable. It is regrettable that in 1994, when problems were identified, the opportunity was not taken to rewrite the whole provision in clear language. This lack of clarity is particularly unfortunate in regulations dealing with individual pension rights, which ought to be comprehensible without expert legal advice. Even with legal expertise the task is difficult. That is apparent from the fact that the very experienced Commissioner required 18 pages of closely packed reasoning to unravel it; and that, even so, I have felt bound to disagree with his conclusion.

There may be a more fundamental issue. Section 113, the enabling provision in the 1992 Act, is a straightforward, albeit draconian, exclusion of those “absent from Great Britain” from any right to benefits under Parts II to V of the Act, “except where Regulations otherwise provide”. The 1975 Regulations seem to go much further than one would ordinarily expect by way of exceptions. For the benefits in question they involve in effect tearing up the section and starting again with a different scheme, constructed by reference to the ordinary residence of the claimant or her spouse, and directed only to annual increments of benefit. It seems surprising, and possibly objectionable in principle, that such a radical change of approach should have been effected without direct Parliamentary sanction. It may be said that the practice dates back now for more than thirty years, and has survived several re-enactments of the statutory provisions. No point has been taken before us on the principle as such; but the unconventional pedigree adds yet further complexity.

In conclusion, I pay tribute to the Commissioner’s detailed examination of the issues, which has resolved many points of contention, and cleared the way for the relatively narrow dispute in this court. However, I respectfully disagree with his conclusion on that issue. I would therefore allow the appeal and (for the reasons explained in paragraph 7 above) remit the matter to the Upper Tribunal for final determination.

I agree.

I also agree.