Head v Social Security Commissioner & Anor

The Claimant in this case seeks judicial review of the refusal of a Social Security Commissioner to grant him permission to appeal against the disallowance of his appeal by the Social Security Appeal Tribunal. The underlying issue of substance concerns the computation of the state retirement pension to which Mr Head is entitled. For part of his working life, Mr Head was a member of an Occupational Pension Scheme (OPS) that was contracted out of the State Earnings Related Pension Scheme (SERPS). For another part, Mr Head was not contracted out of SERPS. This state of affairs is sometimes called ‘contracted in’. Although that term gives the misleading impression that some positive agreement was necessary, it is a convenient label which I, too, will use. While he was contracted out of SERPS, Mr Head had to pay only a lower rate of National Insurance contributions (NICs). His NICs were higher when his employment was contracted in. Mr Head’s essential complaint is that the method of computing his pension does not sufficiently allow for the period that his employment was contracted in and he was paying these higher rates of contributions. As originally formulated, the Claim Form took issue with the interpretation of the relevant legislation, which is the Pension Schemes Act 1993 s.46, as a matter of purely domestic law. At the hearing of the present application, Mr Clifford on behalf of the Claimant made clear that he was not pursuing those arguments. However, he does submit that the interpretation which has so far been adopted by the Department for Work and Pensions and the Appeal Tribunal is incompatible with his rights under Article 1 Protocol 1 of the European Convention on Human Rights. At the hearing he canvassed an alternative possibility that the 1993 Act discriminated against him contrary to Article 14 of the ECHR when read with Article 1 of Protocol 1.

A second issue concerns the nature of the decision under challenge. At the relevant time, a person who was dissatisfied with a decision of the Department on fact or law could appeal to the Appeal Tribunal - see Social Security Act 1998 s.12. The Tribunal’s determination could be appealed on a point of law to a Social Security Commissioner – ibid s.14(1), but the permission of either the Tribunal or a Commissioner was necessary – s.14(10). If the leave was granted and the Commissioner determined the appeal, a further right of appeal existed to the Court of Appeal –s.15(1). Permission of the Commissioner or the Court of Appeal was necessary – s.15(2). If the Commissioner refused permission to appeal against the Tribunal’s determination, that decision could not be appealed to the Court of Appeal – see Bland v Chief Supplementary Benefit Officer [1983] 1 WLR 262. In principle, such a decision is amenable to judicial review. However, it is well established that this Court should be very slow to interfere with a decision of this type. I will need to examine in more detail what has been said about the test to be applied, but the second issue in this case is whether the Claimant can cross that procedural hurdle.

The Claimant became entitled to a pension on 11^th August 2005. His appeal to the Tribunal was disallowed on 16^th March 2006. The Tribunal refused to give its permission to appeal to the Commissioner and the Claimant asked the Commissioner to give permission. On 18^th August 2006, the Commissioner refused permission. He said,

“I can only interfere with the decision of the tribunal if it got the law or procedure wrong. In this case it did not do so. The tribunal and the Commissioner are both bound by the decision of the Court of Appeal (Footnote: ¹), whatever the claimant might think of its approach to s.46. The tribunal reached the only decision that, as a matter of law, was open to it.”

On 8^th November 2006 the Claim Form was issued. On 17^th May 2007 Kenneth Parker QC, sitting as a Deputy Judge of the High Court, refused permission to apply for judicial review, but after an oral hearing on 21^st September 2007, Calvert-Smith J. granted permission. Up to this point, Mr Head had been representing himself. He has since had the pro bono assistance of the Free Representation Unit and James Clifford. I am very grateful to FRU and Mr Clifford for the help which they have provided.

Since 2007 the machinery for deciding challenges to the Department’s decisions has changed. In place of the Appeal Tribunals there is now the First-tier Tribunal. In place of the Commissioners, there is now an Administrative Appeals Chamber of the Upper Tribunal. The former Commissioners have become Judges of the Upper Tribunal. That alteration does not affect either of the issues that I have to decide. It simply means that if the application for judicial review succeeds, the matter will go back to a Judge of the Upper Tribunal.

A second development, though, does have a bearing on both issues. On 8^th December 2008 the Upper Tribunal (Judge Rowland) had to consider the very same issue as I have identified as the issue of substance in this case. He, too, had to determine the proper interpretation of s.46 of the 1993 Act where a pensioner had for some of his working life been contracted out of SERPS and for part of it contracted in. On that appeal, the Appellant was represented by Mr Clifford (i.e. the same counsel who now appears for Mr Head) and the Department was represented by Mr Henshaw (who also appears for the Department as an Interested Party in the proceedings before me). Judge Rowland’s decision, CP/2611/2007 [2008] UKUT 33 (AAC) upheld the interpretation of s.46 which had been adopted by the Tribunal in Mr Head’s case. I am told that an application for permission to appeal has been made to the Court of Appeal. The Court is yet to decide the application.

In R (Sivasubramaniam) v Wandsworth County Court [2003] 1 WLR 475 the Court of Appeal had to consider whether judicial review would lie to quash the decision of a Circuit Judge who had refused permission to appeal to the county court against a ruling of a district judge. The Court of Appeal said that the judicial review jurisdiction was not ousted, but added at para [56]:

“The possibility remains that there may be very rare cases where a litigant challenges the jurisdiction of a circuit judge giving or refusing permission to appeal on the ground of jurisdictional error in the narrow, pre-Anisminic sense, or procedural irregularity of such a kind as to constitute a denial of the applicant’s right to a fair hearing. If such grounds are made out we consider that a proper case for judicial review will have been established.”

The Court of Appeal again had to consider the test as to when judicial review should be granted of a County Court judge’s refusal of permission to appeal a District Judge’s decision in R (on the application of Strickson) v Preston County Court [2007] EWCA Civ 1132. Laws LJ said at para 32:

"I think a distinction should may be drawn between a case where the judge simply gets it wrong, even extremely wrong (and wrong on the law, or the facts, or both), and a case where, as I would venture to put it, the judicial process itself has been frustrated or corrupted. This, I think, marks the truly exceptional case. It will or may include the case of pre--Anisminic jurisdictional error, where the court embarks upon an enquiry which it lacks all power to deal with, or fails altogether to enquire or adjudicate upon a matter which it was its unequivocal duty to address. It would include substantial denial of the right to a fair hearing, and it may include cases where the lower court has indeed acted "in complete disregard of its duties" (Gregory), and cases where the court has declined to go into a point of law in a particular area which, against a background of conflicting decisions of a lower tribunal, the public interest obviously requires to be decided (Sinclair). The Sinclair type of case is perhaps a sub-class of the Gregory case. Those, in any event, may be less hard-edged then the pure pre--Anisminic jurisdictional error case. The courts will have to be vigilant to see that only truly exceptional cases -- where there has indeed, as I have put it, been a frustration or corruption of the very judicial process -- are allowed to proceed to judicial review in cases where further appeal rights are barred by section 54 (4) [of the Access to Justice Act 1999]."

In the context of the social security appellate system, the Court of Appeal said this in R v The Social Security Commissioner and the Social Security Appeal Tribunal ex parte Pattni [1993] Fam Law 213:

“Where the right to grant or refuse leave to appeal is that of courts or tribunals which are not courts of record, there is, however, a safety net or long stop which can be invoked if the refusal of leave to appeal is plainly wrong. This is the judicial review procedure. It is to be invoked only in the plainest possible case, as otherwise the High Court would, in effect, simply be providing an avenue for appeal from the grant or refusal of leave.”

In Sinclair Gardens Investments (Kensington) Ltd v The Lands Tribunal [2006] 3 All ER 650 the Court of Appeal had to examine the criteria for judicially reviewing a decision of the Lands Tribunal refusing permission to appeal against a determination of a Leasehold Valuation Tribunal. The Court of Appeal upheld the decision of Sullivan J. who had held that judicial review should be confined to exceptional circumstances (see paras [28] and [51]). Applying the tests formulated in R(G) v Immigration Appeal Tribunal [2005] 1 WLR 1445 the Court of Appeal looked at whether the statutory scheme provided “an adequate system for reviewing the merits” of the first instance decision and “fair, adequate and proportionate protection against the risk that [the first instance tribunal] acted without jurisdiction or fell into error.” The “exceptional circumstances” criterion would apply if those tests were satisfied – see para [40].

R (on the application of Hook) v The Social Security Commissioner [2007] EWHC 1705 (Admin) Mr Nicholas Blake QC, sitting as a Deputy Judge of the High Court, was also judicially reviewing a decision of the Commissioner to refuse permission to appeal. After referring to Sinclair Gardens he said, at para [6]

“It is not necessary for me to resolve precisely the test to be applied in judicial review from a Social Security Commissioner, and I recognise that in many cases, claimants may not be legally represented and points of importance may not have been developed in the way that would be desirable. The inquiry is inquisitorial, and the Tribunal and the Commissioner are both able to play an active role in the elucidation of relevant facts and legal issues. However, having regard to the fact that this is a review of a specialist expert Tribunal in the field of detailed social security regulation concerning entitlement to public funds, it is common ground that the test to be applied to avoid unnecessary expense and to achieve the desirable aim of finality in this context is that a very substantial point of law is required.”

Collins J. was faced with a renewed application for permission to apply for judicial review of the Child Support Commissioners’ refusal to grant permission to appeal in R (on the application of Starling) v Child Support Commissioners [2008] EWHC 1319 (Admin). He applied the “exceptional circumstances” test - see para [22].

In the Claim Form, the argument was made that Commissioner Levenson had erred in saying that he was bound by the decision of Lloyd LJ in Pearce. This was a decision refusing permission to appeal to the Court of Appeal and such decisions are not binding, see Clark v University of Lincolnshire and Humberside [2000] 1 WLR 1988. Indeed, they should not even be cited unless they contain an express statement to the effect that they establish a new principle or extend the present law – see Practice Direction (Citation of Authorities) [2001] 1 WLR 1001 para 6.1. However, once the Claimant decided that he could not pursue the argument based on the purely domestic interpretation of s.46, this objection to the Commissioner’s decision fell away.

Rather, Mr Clifford argued that the human rights argument was, in Mr Blake’s words, a “very substantial point of law.” The amount involved was some £27 per week for the Claimant himself, but the issue would impact on a very large number of pensioners and employees who, like Mr Head, had been sometimes in contracted-out employment and sometimes in contracted-in employment during the existence of SERPS. The issue was a pure point of law in the sense that it was not dependent on the particular details of Mr Head’s case. The human rights argument was important. It had not been raised in the course of Mr Head’s own proceedings. It had been in other cases considered by Social Security Commissioners, but none where the individual had been represented. It was also significant, he submitted, that the issue arose between the state and an individual.

Like Mr Blake, I do not find it necessary to resolve precisely what test is to be applied. Whichever is used, Mr Head cannot succeed. In my judgment this case is a long way from meeting the “exceptional circumstances” test where I would be justified in granting judicial review of Commissioner Levenson’s decision. There clearly is no jurisdictional error in the pre-Anisminic sense in this case. Mr Clifford does not argue any more that there was procedural error in the Commissioner’s refusal of permission to appeal. Nor has there been a corruption or frustration of the process in the sense described by Laws LJ. in Strickson. It cannot be said to be an example of the “plainest possible” cases to which Pattni said judicial review should be confined. Nor does this case demonstrate shortcomings of the appellate structure of the kind which Neuberger LJ referred to in Sinclair Gardens and which would justify a departure from the “exceptional circumstances” test.

It has to be remembered that the human rights argument which Mr Clifford now pursues did not feature in the grounds of appeal which Mr Head put before the Commissioner. As Mr Blake said in Hook, some allowance must be made for the fact that claimants in the social security appellate system often represent themselves and the Tribunal and Commissioner have an inquisitorial role. However, even with those features, care must be taken to avoid a situation where judicial review becomes in effect a means of appealing to the High Court against the refusal by a Commissioner of permission to appeal. That outcome would not be consistent with the scheme which Parliament has adopted.

Out of deference to the arguments put forward by Mr Clifford, I will consider the merits of the human rights argument, but putting oneself in the shoes of Mr Levenson, it could not be said that it was so obviously meritorious that he should of his own initiative have identified it and granted permission to appeal on that basis. On the contrary, the argument had been considered and rejected by Commissioner Turnbull in CP/5084/2001, Commissioner Fellner in CP/281/02, Commissioner White in CP/1023/04 (I add here that it was from this decision that Lloyd LJ refused permission to appeal in Pearce. The human rights argument was not pursued before the Court of Appeal), Commissioner Howell in CP/2291/04 and in CP/60/06 and 61/06. I have already mentioned that in December 2008 Judge Rowland again had to deal with the effect on a retirement pension of periods of contracted-out and contracted-in employment. On this occasion, both sides were represented. Mr Clifford acted for the Appellant. He did not on that occasion take the human rights argument, although he accepted in the course of this hearing that there was no material difference between that case and the present. If the human rights argument is good for Mr Head, it would have equally benefited the Appellant in that case. Of course, that is not determinative of the issue, but it does illustrate how difficult it is to argue that the human rights argument was so plain, obvious and strongly in favour of Mr Head that Mr Levenson should have identified it of his own motion and granted permission to appeal on that basis.

I am not sure that Mr Blake’s phrase “a very substantial point of law” was intended to go beyond this. I notice that he said his test was “common ground”. It follows immediately after his discussion of Sinclair Gardens and there is nothing in that case to justify a test of greater width. Indeed, in paragraph [4] of his judgment, Mr Blake had expressly said that “something more than a merely debateable error of law in the Commissioner’s decision is needed for relief to be granted.”

Article 1 of Protocol 1 to the ECHR says:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

In summary, Mr Clifford argued that the Claimant’s “possessions” included the future right to an enhanced pension which he earned by the payment of the higher rate NICs during his period of contracted-in employment. Section 46 of the 1993 Act “deprived” him of those possessions.

I need to say a little more about the statutory framework. Section 46 of the Pensions Schemes Act 1993 says, so far as material:

“(1)

Where for any period a person is entitled both –

(a)

to a Category A … retirement pension ….and

(b)

to one or more guaranteed minimum pensions,

the weekly rate of the benefit mentioned in paragraph (a) shall for that period be reduced by an amount equal –

(i)

to that part of its additional pension which is attributable to earnings factors for any tax years ending before [6^th April 1997]

(ii)

to the weekly rate of the pension mentioned in paragraph (b) (or, if there is more than one such pension, their aggregate weekly rates),

whichever is the less.”

This in turn requires some explanation. A Category A retirement pension is the state provided pension. Material to this case it includes a “basic pension” at a fixed weekly rate and an “additional pension” – see Social Security Contributions and Benefits Act 1992 s.44. The concept of an additional pension had its derivation in the Social Security Pensions Act 1975 and the introduction of SERPS. SERPS was in operation between 1978 (when this part of the 1975 Act came into effect) and 1997. Employees could chose to contract out of SERPS only if their employers provided an OPS which agreed to pay at least the guaranteed minimum pension (GMP) on the employee’s retirement. A GMP was thus a pension (or part of a pension) provided by a private scheme. The advantage of contracting out was that both the employee and the employer paid a lower rate of NICs. In addition, some employees no doubt hoped that their OPS would in fact yield a pension greater than the GMP.

The formula in section 46 means that the Category A pension would never fall below the level of the basic pension. The difference between the parties is this. The Claimant argues that what should stand to be deducted under sub-paragraph (i) in s.46(1) is the additional pension which is attributable to earnings factors for those tax years for which he was in contracted out employment. The Department (and the Appeal Tribunal) considered that there should be deducted the additional pension attributable to the whole period that the Claimant was both in employment and SERPS was in operation. If Mr Head’s alternative is correct he would be entitled to an additional pension of £34.98 as well as the basic pension. If the Department’s alterative is right, he is only entitled to an additional pension of £8.06 on top of his basic pension. I have ignored the further elements of Mr Head’s pension which are not in dispute.

It is right to note that as interpreted by the Department the scheme has been described as “illogical” by Lloyd LJ in Pearce and “anomalous” by Judge Rowland in CP/2611/2007, but as I have noted above, Mr Clifford now accepts that the Department’s interpretation is unassailable if the Human Rights arguments are not taken into account.

Mr Henshaw does not dispute that, in principle, social security benefits can come within the Convention concept of “possessions”. However, in this case, he submits the legislation of which Mr Head complains does not “deprive” him of any possessions, it simply defines the benefit to which he is entitled on retirement. Article 1 of Protocol 1 does not, he submits, require any particular level of benefit to be paid. He refers to Muller v Austria App No 5849/72 (1975) 3 DR 25 where the European Commission of Human Rights said,

“Now, whereas it is conceivable that the right to be a beneficiary of an old age insurance system to which one has paid contributions is a right of ownership guaranteed by Article 1 of the First Protocol, the same is not necessarily true where the exact amount of the pension is concerned. The Commission considers that even if it is assumed that Article 1 of the First Protocol guarantees persons who have paid contribution s to a social insurance system the right to derive benefit from the system, it cannot be interpreted as entitling that person to a pension of a particular amount.”

In X v Italy App. No. 7459/76 (1977) 11 DR 114 referred to Muller and added,

“In order that such a right may be established, however, it is necessary that the interested party should have satisfied domestic legal requirements governing the right, in principle to an annuity.”

The Commission again reiterated these points in JW v United Kingdom App. No. 9776/82 (1983) 34 DR 153.

The Court of Appeal had to consider the application of Article 1 Protocol 1 in the social security context in Carson v Secretary of State for Work and Pensions [2003] 3 All ER 577. Laws LJ (giving the leading judgment of the Court) said at paras [18] & [19]

“[18] … In my judgment the starting point for this point of the case [i.e. Article 1 Protocol 1 taken on its own by contrast with another line of argument run by the appellants based on Article 14 in conjunction with Article 1 Protocol 1] is the proposition, vouched by the Strasbourg court’s judgment in Marckx v Belgium (1989) 2 EHRR 330, that art1P applies only to a person’s existing possessions: it does not guarantee a right to acquire possessions. It is then submitted for the Secretary of State that domestic legislation which specifies the amount of any state benefit, as has happened here in both appeals, cannot constitute an interference with the right given by art1P: rather it merely defines the property right in the particular case, whose security art 1P may then protect.

[19] This proposition taken by the Secretary of State is supported by a consistent line of Strasbourg authority, some of it dealing in terms with complaints put forward by UK pensioners abroad as to the government’s refusal to uprate their pensions.”

Laws LJ cited the decisions of the Commission to which I have referred and to others. He concluded that the Secretary of State’s proposition above was indeed correct.

In the House of Lords (R (Carson) v Secretary of State for Work and Pensions [2006] 1 AC 173) the Appellants relied exclusively on their discrimination argument under Article 14 of the Convention. However, comments pertinent to the present issue were made by Lord Hoffmann. He observed at [23] that NICs were “hardly distinguishable from general taxation, the ‘fund’ exists purely as a matter of public accounting and no one is entitled to anything beyond that which the legislation may from time to time prescribed.” He returned to the point at [21] when he said, “NICs have no exclusive link to retirement pensions, comparable with contributions to a private pension scheme. In fact, the link is a rather tenuous one. NICs form a source of part of the revenue which pays for all social security benefits and the National Health Service (the rest comes from ordinary taxation).” The Fourth Section of the European Court of Human Rights endorsed the remarks of both Laws LJ and Lord Hoffmann – see Carson v United Kingdom App. No. 42184/05 judgment of 4^th November 2008 para [67]. The case was referred to the Grand Chamber on 6^th April 2009 but for the time being at least the Secretary of State’s position has the endorsement of Strasbourg.

Applied to the present context, Mr Henshaw argues that the Claimant had no relevant “possession” until he reached retirement age. Strasbourg leaves it to national law to determine what that entitlement is. Mr Clifford has accepted that the Department’s interpretation of that entitlement in s.46 of the 1993 Act cannot be challenged. It follows that there has been no deprivation of Mr Head’s possessions for the purposes of Article 1 Protocol 1. The fact that the Claimant paid higher rate NICs for part of the time that SERPS was in operation does not alter this analysis. Just as the payment of NICs in Carson did not help the pensioners in that case to show a breach of Article 1 Protocol 1, so, too, the payment of higher rate NICs for part of his working life does not help Mr Head. In any case, Mr Henshaw submitted, the feature of the calculation of the additional pension which is in issue here has been a consistent part of the SERPS throughout its existence. Contracting out of SERPS had a number of consequences: the payment of a lower rate NICs during the period of contracting out, the enjoyment of a GMP and the possibility of earning a pension that was higher still than the GMP. All of those were to Mr Head’s advantage. Another consequence was that the additional state pension to which he would become entitled on retirement would be reduced in accordance with s.46. Nothing in this, Mr Henshaw argued is contrary to Article 1 Protocol 1.

The Commissioners who have considered the point have consistently agreed that the Human Rights argument does not affect the interpretation of s.46.

I find Mr Henshaw’s arguments persuasive. I do not think that Commissioner Turnbull’s criteria help Mr Head. The provision in his case had the effect of simply preventing him being entitled to a larger payment. The provision was in force throughout the time that he made his contributions. Although Mr Head had paid higher NICs during his period of contracted-in employment, the link between NICs and pension entitlement is tenuous for the reasons given in Carson and the size of the reduction in benefits was not so dramatic as to make a difference to the analysis. In Commissioner Turnbull’s case, the state provided pension was reduced to avoid duplication of another state provided benefit (accommodation and maintenance in hospital). Mr Head’s additional pension was reduced because of a privately provided pension. But I do not think that this is a significant difference. As I have already emphasised, contracting out of SERPS led to a number of consequences. The balance of advantage was a matter for the employer and employee to judge.

I am conscious that the statutory scheme gives to the Court of Appeal and not this Court the task of reviewing the decisions of the Commissioners on points of law. It will be for the Court of Appeal to decide whether there is a real prospect of an appeal from Judge Rowland’s decision succeeding or whether for some other reason permission to appeal should be given. However, for the purpose of the present case, I think that the merits of the argument under Article 1 Protocol 1 are very weak. They do not assist the Claimant to make good a reason why Commissioner Levenson’s decision should be quashed.

As I have noted, at the opening of the hearing, Mr Clifford indicated that he wished to be able to argue in the alternative that the Department’s interpretation would lead to a violation of Article 14 taken in conjunction with Article 1 Protocol 1. Mr Henshaw objected. This was not a point which had been taken previously. Even now it was not formulated as an amendment to the Claim Form. His client would be prejudiced because there was a substantial body of law on the correct approach to Article 14. An important aspect was the identification of a proper comparator and this had not yet been done. It might be necessary to submit evidence, particularly in relation to justification. Mr Head was anxious to have the matter dealt with substantively at the present hearing, but fairness would require the Department to be allowed an adjournment to respond. It was even more difficult for Mr Clifford to persuade the Court that this was a matter which ought to have led Commissioner Levenson to grant permission to appeal on his own initiative. The relevance of the argument to the Claimant’s case had not even occurred to the Claimant’s advisers until very recently.

In my judgment these are all sound reasons why I should not allow the Claim to be expanded to take in the Article 14 argument. I do not do so. If it is any comfort to the Claimant, I am extremely doubtful as to whether it would have availed him if he had been able to invoke this provision. In particular, it seems to me that it would be very hard to show that Mr Head was in a properly analogous position to those who never contracted out of SERPS or those who had always contracted out. Mr Clifford argued that employees in neither category paid NICS for which they received no benefit. However, that is to reprise the argument which was rejected by Lord Hoffmann in Carson. In other words, it is an argument which ignores the tenuous character of the link between NICs and subsequent benefits. Even if I am wrong about that, the Department would (on my limited consideration of the matter) have been on strong ground for showing that any difference in treatment was justified. There was, as I have indicated, simply a different bundle of consequences for those who chose to go down the contracting-out route (even if only temporarily) rather than staying with SERPS throughout.

For all of these reasons, this claim for judicial review is dismissed.