Secretary of State for Justice v David White

This is an appeal against the decision of Employment Judge Knowles (“the Judge”) sitting in the Employment Tribunals in Leeds dated 11 February 2025. By that decision, the Judge determined a “compensation question” under regulation 41(1) of the Justices of the Peace Act 1949 (Compensation) Regulations 1978 (“the Regulations”).

The compensation question related to the level of the Retirement Compensation lump sum to which the Respondent was entitled under the Regulations, having reached the normal retiring age of 70. The parties agree that the Respondent is entitled to a lump sum of £226,769.93, from which a deduction has to be made under Regulation 30(3)(b). That deduction is to reflect the superannuation lump sum paid to the Respondent under the Local Government Pension Scheme (“the LGPS”) on his loss of office, at age 50. The dispute on this appeal is the level of that deduction and, essentially, whether it should make allowance for inflation.

The Respondent contends that it is only the actual superannuation lump sum paid that he received at age 50 which should be deducted. That was a sum of £88,815.20. The Judge adopted the Respondent’s approach. The Secretary of State for Justice (“the SSJ”) appeals that decision, contending that the appropriate deduction is £148,284.72.

The appeal is made to the High Court rather than the Employment Appeal Tribunal because Regulation 41 proceedings do not arise under or by virtue of any of the enactments mentioned in section 21(1) of the Employment Tribunals Act 1996. The appeal is on a point of law under section 11(1) of the Tribunals and Inquiries Act 1992. There is no requirement for permission to appeal.

The Regulations are part of a series of legislative provisions known as the “Crombie” legislation or code. As Guy Barnett MP explained in a House of Commons debate on 3 July 1980, the Crombie code originated in 1947, when the then Government had to make compensation provisions for redundancies as a result of nationalising industries and local government reorganisation. The code applies only in cases of statutory intervention: Hansard, Vol 987, Col 1818.

The code includes a series of similar regimes for various different public sector offices and employment. These Regulations apply to Justices’ Clerks, who held office and were not employees. The compensation paid under the Regulations is far in excess of that which was provided to other civil servants and private sector employees and the regulations were revoked (prospectively) in 2011. As the Judge observed in his judgment at [23], the “degree of generosity” in the Regulations is not a matter for the court, but solely “what rights and obligations they grant”.

In common with other elements in the Crombie code, the overarching legislative purpose of the Regulations is to remedy financial losses arising from loss of office or loss or diminution of “emoluments” (defined by Regulation 38(1) as “salary, wages, fees and other payments paid or made to an officer as such for his own use, and also the money value of any accommodation or other allowances in kind appertaining to [the] office”). That this is the purpose of the Regulations is clear from the repeated references to compensation for loss of office or loss or diminution of emoluments in the text of the Regulations themselves and the two pieces of enabling primary legislation for the Regulations, namely the Justices of the Peace Act 1949, s.42(1) and the Superannuation Act 1972, s.24(1)(b).

Parts III, IV and V of the Regulations make provision, respectively, for “Resettlement Compensation”, “Long-Term Compensation” (“LTC”) and “Retirement Compensation” (“RC”). This three-stage approach is a common feature of the Crombie code, as Mr Barnett MP explained:

“The code involves three stages, each with its own qualifying conditions. They are resettlement, long-term compensation and retirement. The basic principle is to relate the compensation in each case as precisely as possible to the loss that an individual sustains as a consequence of a statutory change made by the Government and Parliament. Therefore, though its terms are reasonably generous they are related strictly and stringently in each case to the circumstances of the redundant person. It is not—and I repeat “not”—a golden handshake”: Hansard, Vol 987, Col 1818.

Similarly, in Ford (19 June 2006, P01146) at [26.7] the Pensions Ombudsman summarised the position of the Department of Education and Skills in that case on the origins and purpose of the Crombie Code thus:

“26.7

The purpose of … the “Crombie code” is to compensate a person who through no fault of their own suffers loss of employment or a diminution of his emoluments. The code provides for the claimant to receive up to two thirds of the resources he would have had had he not suffered a loss. Thus, it provides for a lump sum payment to enable the person to “find his feet”; a monthly payment (Long Term Compensation) to bring his resources back up to two thirds of pre-loss levels in his working life; and a retirement pension to compensate him for his lost pension rights (Retirement Compensation). However, also underlying the provisions is an assumption that the person will do the best to mitigate their loss, return by their own efforts to the level of resources they enjoyed before this loss and so wipe out the need for compensation payments”.

Part V of the Regulations deals with RC. Regulation 18 provides that:

“18.

Retirement compensation for loss of emoluments payable to pensionable officer on attainment of normal retiring age

(1)

Subject to the provisions of these Regulations, when a person to whom this Part of these Regulations applies reaches normal retiring age, the retirement compensation payable to him for the loss of emoluments shall be—

(a)

an annual sum equal to the amount of his accrued pension, and

(b)

a lump sum equal to the amount of his accrued retiring allowance (if any).

(2)

No compensation shall be payable under this Regulation if the person has continued to pay superannuation contributions as if he had suffered no loss of emoluments”.

It is the lump sum element of the RC, payable under Regulation 18(1)(b) (“the RC lump sum”), which is at issue in this appeal. For the purposes of Regulation 18(1)(b), Regulation 2(1) defines “accrued retiring allowance” as:

“any lump sum payment to which he would have become entitled under the pension scheme to which he was last subject before suffering loss of office according to the method of calculation (modified where necessary for the purpose of giving effect to these Regulations) prescribed by that scheme if, at the date on which he ceased to be subject to that scheme, he had attained normal retiring age and complied with any requirement of that scheme as to a minimum period of qualifying service or contribution and completed any additional contributory payments or payments in respect of added years which he was in the course of making.” 

In effect, therefore, the RC lump sum under Regulation 18(1)(b) is intended to be equivalent to the lump sum that the person would have been entitled to under their last pension scheme had they not lost office early.

The Regulations are underpinned by the principle that Crombie compensation is offset by certain other remuneration or benefits received, including superannuation benefits accrued during the office lost. Accordingly, Regulation 30 provides as follows in material part:

“Reduction of compensation in certain cases

30…(3) Where compensation for loss of office is payable under these Regulations to or in respect of any person and that person…is or are also entitled (whether immediately or on the person’s attaining some greater age) to a superannuation benefit under his last relevant pension scheme in respect of any service of which account was taken in calculating the compensation—

(a)

any instalment of that compensation which is payable in respect of any period shall be reduced by the amount of the instalment of such superannuation benefit which is payable in respect of the same period, and

(b)

any of that compensation which is payable under Part IV or Part V of these Regulations and which is payable as a lump sum shall be reduced by the amount of any lump sum superannuation benefit…”.

The means by which the “amount of any lump sum superannuation benefit” is calculated for the purposes of Regulation 30(3)(b) is the central issue on this appeal.

The Respondent was born on 17 March 1954 and joined the Magisterial Service on 1 October 1976, working first in Staffordshire and then in South Yorkshire. He later became Justices’ Clerk for Sheffield and, for the last five years of his career, he held the office of Justices’ Clerk for both Sheffield and Barnsley.

In 2004 his employer, the South Yorkshire Magistrates’ Courts Committee (“the MCC”), following Government policy, decided to reduce the number of Justices’ Clerks in the county from two to one. As the older and longer serving Justices’ Clerk, the Respondent reluctantly agreed to take redundancy. His last date of service was 31 January 2005 when he was aged 50. Throughout his service he was a member of the LGPS. 

On 20 September 2004 the Respondent entered into a Compromise Agreement with the MCC. This recorded the parties’ mutual understanding of his entitlement to compensation under the Regulations. It also made provision for payments to the Respondent under the LGPS.

Paragraph 2.2 of the Compromise Agreement provided that the Respondent would receive each of the three elements of compensation under the Regulations: (i) Resettlement Compensation estimated to be in the sum of £39,885.27; (ii) LTC estimated to be in the sum of £55,482.72, such payment to be index linked in accordance with the Pensions (Increase) Act 1971; and (iii) RC upon attaining normal retirement age (in this case age 70) “in accordance with Part V and Regulation 18 of the [Regulations] as amended, calculated on the basis of 43.337 / 80^th of pensionable remuneration at 31.01.05 enhanced by pension increase orders”.

Paragraph 2.6 provided that “[a]n annex to the agreement (whilst not part of the agreement) sets out in detail the calculations used to arrive at the estimated figures in 2.2 above.”

Paragraph 2.3 of the Compromise Agreement provided that the MCC would agree to the making of immediate payment to the Respondent of his pension benefits under the LGPS on 1 February 2005, at which point “the annual pension will be offset against the long term compensation due”. Under the regulations governing the LGPS scheme (Footnote: ¹), the Respondent was entitled to early payment of his pension benefits because he had attained the age of 50 and the employing authority certified that he had ceased to hold that employment by reason of redundancy.

Accordingly, in February 2005, the Respondent was paid his Resettlement Compensation and began to receive his LTC under the Regulations. These effectively helped the Respondent “find his feet” on loss of office, to quote Ford at [26.7] (see [9] above); and compensated the Respondent for his loss of earnings between the date of loss of office at 50 and the normal retirement age of 70. He also received his pension benefits under the LGPS. These comprised a lump sum of £88,815.20 and his annual pension, which he began to receive monthly. The Judge accurately described the compensation under the Regulations as “effectively a top-up to [the Respondent’s] pension to provide for his early loss of office”: judgment at [21].

Under the Regulations it is for the “Determining Authority” (as defined under the Regulations) to determine what compensation is received. After Magistrates’ Courts Committees were abolished, and their functions transferred to the Lord Chancellor under the Courts Act 2003, the Lord Chancellor became the Determining Authority for former Justices’ Clerks. The SSJ is now the Determining Authority.

In around February 2024, as the Respondent approached his 70^th birthday, he began liaising with the Ministry of Justice about his RC. In due course the SSJ made a determination of what RC was to be paid to the Respondent under the Regulations. The Respondent sought the determination of certain issues relating to this by the Employment Tribunal.  

The parties agree that the Respondent’s RC lump sum under Regulation 18(1)(b), before any deduction under Regulation 30(3)(b), is £226,769.93, for the reasons explained at [32]-[36] below.

By the end of the hearing before the Judge the sole issue was the sum that should be deducted from the Respondent’s RC lump sum under Regulation 30(3)(b).

The Judge heard evidence from David Martin, the Ministry of Justice’s Senior Pensions Lead. He was critical of Mr Martin’s evidence in his judgment in several respects. The Judge observed that Mr Martin’s evidence on the calculation methodology was based on predecessor regulations “which have no application in the [Respondent’s] case” and recorded that when he asked Mr Martin whether he had followed Regulation 30(3)(b) in the Respondent’s case, his answer was “not to the letter”: judgment at [37] and [40]. The Judge found Mr Martin’s explanations for what the Ministry of Justice had done in the Respondent’s case and why “perplexing and confusing”; and observed that he could identify “no basis” for Mr Martin’s methodology: [41] and [42].

The Judge concluded that the SSJ’s position on the central issue was “unsustainable”; that there was “no basis within…[Regulation 30(3)(b)]…which would allow the [SSJ] to deduct anything other than the amount of lump sum that the Claimant had accrued under his pension”; and that overall there was “no basis for the [SSJ’s] stated methodology”: [53], [54] and [75]. 

Accordingly, the Judge held at [76] that:

“…the only figure that falls under the Crombie Regulations to be deducted from the agreed £226,769.93 in the formula calculating his lump sum is the £88,815.20 lump sum which had accrued when the Claimant retired early in 2005, that is “the amount of any lump sum superannuation benefit” [emphasis in the original].

The LGPS lump sum paid to the Respondent at age 50 was calculated according to the following formula for a “standard retirement grant” under the LGPS scheme: Pensionable Remuneration (£83,580) x 3/80^th x Total Period of Membership of the Scheme (28.337) = £88,815.20.

Pensionable Remuneration consists, in summary, of the person’s remuneration for the year before they ceased to be a member of the LGPS.

The Total Period of Membership of the Scheme consists of any period for which the member has paid (or is treated as having paid) contributions, as well as certain other prescribed periods which “count” as periods for this definition. The figure of 28.337 for the Respondent reflects his superannuable service in the LGPS of 28 years, 123 days.

RC is intended to compensate the individual for lost pension rights. In order to further that intention, the parties agree that RC is designed to be equivalent to the LGPS annual pension and lump sum (“the superannuation benefit”) that the Respondent would have received had he remained in office until the normal retirement age of 70 and not lost his office at an earlier date.

The parties agree that the formula used to calculate the RC lump sum under Regulation 18(1)(b), before any deduction under Regulation 30(3)(b), is as follows: Final Salary (£83,988) x Inflation Uprating (1.6613) x 3/80ths x Qualifying Service (43.34). This gives a figure of £226,769.93.

The Final Salary figure used in this formula (£83,988) is slightly different to the Pensionable Remuneration figure used to calculate the LGPS lump sum paid to the Respondent at age 50 (£83,580). The Regulations take into account all lost remuneration (which can include non-pensionable allowances) which may well account for this relatively modest difference.

The use of the Inflation Uprating figure illustrates that the formula takes into account provision for pension increases which the Respondent would have received had he remained in office until, retired at, and taken benefits, at age 70. 

The Qualifying Service figure of 43.34 years in the formula comprises (i) the Respondent’s 28.34 years Total Period of Membership of the Scheme, used for LGPS purposes; plus (ii) an additional 15 years’ service with which he was credited in accordance with Regulation 17(2) of the Regulations (“Crombie Additional Service”). This figure has been used for the purposes of calculating RC only, to approximate the years of service the Respondent would have had if he had remained in office until age 70. 

RC is specifically designed to be equivalent to the shortfall in superannuation benefit, that is the net loss between (i) the LGPS annual pension and lump sum actually paid to the Respondent upon his loss of office aged 50; and (ii) the LGPS annual pension and lump sum he would have received had he remained in office until age 70.

Accordingly, if the Respondent received the RC lump sum under Regulation 18(1)(b) without any deduction under Regulation 30(3)(b), there would be “double counting” because he would have received both (i) and (ii) above.

If the Respondent’s interpretation of Regulation 30(3)(b) is adopted, the level of deduction is simply the amount of the LGPS lump sum he received at age 50. That was £88,815.20.

If the SSJ’s interpretation of Regulation 30(3)(b) is adopted, he proposes that the level of deduction is calculated according to the following formula:Final Salary (£83,988) x Inflation Uprating (1.6613) x 3/80ths x 28.34. This gives a figure of £148,284.72.

This adopts the formula used to calculate the LGPS lump sum paid to the Respondent at age 50 (see [29]-[31] above) save that (i) the different Final Salary figure as was used in the agreed RC lump sum formula has been adopted; (ii) provision has been made for Inflation Uprating; and (iii) the “service” multiplicand has been “rounded up” from 28.337 to 28.34.

The SSJ’s overarching position was that if the RC lump sum is uprated by inflation to age 70, as it is, “the amount of any lump sum superannuation benefit” to be deducted under Regulation 30(3)(b) must be similarly uprated.

The SSJ’s rationale for this position has changed throughout these proceedings including during the appeal hearing. However, it is my understanding that in the final analysis the SSJ contended that his position was correct for the following three reasons.

First, it was wrong to interpret Regulation 30(3)(b) as requiring reduction by the amount of any lump sum superannuation benefit “received”, as the Employment Judge had done and the Respondent sought to do, when the wording of the Regulation contains no such wording or requirement.

Second, as a matter of fairness between the parties, Regulation 30(3)(b) requires the deduction of “like for like”. The sum paid at age 70, would, like the agreed RC lump sum, have been uprated by inflation; whereas the sum paid at age 50 was not uprated, as it was paid using then current values. Mr Heppinstall KC conceptualised this by reference to a game of Snakes and Ladders: there would, he argued, be unfairness to the SSJ if the Respondent was entitled to go up the “ladder” of securing the RC lump sum uprated for inflation but was not required to go down the “snake” of having the superannuation benefit similarly uprated.

Third, that the SSJ’s interpretation is correct is shown by the introductory words of Regulation 30(3) which refer to the period of “service of which account was taken” for the purposes of the RC calculation. The deducted benefit must also relate to the period of service of which account was taken in calculating the compensation, which is the benefit which would have been paid at age 70, not that paid at age 50.

With all due respect to the attractive way in which Mr Heppinstall KC’s submissions were advanced, I do not accept them. In my judgment Mr Cainer is correct that the only figure that should be deducted under Regulation 30(3)(b) is the £88,815.20 LGPS lump sum the Respondent was actually paid in 2005 and not a notional, uprated figure, for the following reasons.

In determining the meaning of Regulation 30(3)(b), it is necessary to “ascertain the intention of Parliament expressed in the language under consideration”, albeit that “the intention of Parliament” is a “shorthand intention which the court reasonably imputes to Parliament in respect of the language used”: R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd [2001] 2 AC 349, 396, per Lord Nicholl. In answering this objective question, regard must be had, primarily, to the wording used by Parliament, seen in its legislative context: R (O) v Secretary of State for the Home Department [2022] UKSC 3, [2023] AC 255 at [29]-[31] and Bennion, Bailey and Norbury on Statutory Interpretation (8th Edition, 2020) at sections 10.9 and 11.1.

In my judgment, the natural and literal interpretation of the wording used by Parliament in Regulation 30(3)(b), seen in the context of the Regulations as a whole, leads to the approach contended for by the Respondent.

The words “shall be reduced by the amount of any lump sum superannuation benefit” in Regulation 30(3)(b) are naturally to be interpreted as referring to any lump sum superannuation benefit actually received. There is nothing in the wording of Regulation 30(3)(b) clearly indicating that any other method for calculating the sum to be deducted should be used, let alone anything which supports the SSJ’s proposed method of performing the calculation by reference to a notional, uprated sum. The SSJ was able to point to no authority to support his proposed interpretation. As the Judge observed, “[i]t would not have been difficult to write the Regulations” to make provision for what the SSJ contends should be done: judgment at [71].

Similarly, the natural and literal interpretation of Regulation 30(3)(a) is that it provides for each monthly instalment of Crombie compensation (whether LTC or RC) to be reduced by the amount of each monthly instalment of the LGPS annual pension actually received.

Further, the first part of Regulation 30(3) refers specifically to a superannuation benefit under the last relevant pension scheme to which the person in question “is or are also entitled”. Here, the only such sum to which the Respondent was entitled was the LGPS lump sum of £88,815.20 he actually received. The Respondent has never been entitled to the notional uprated sum contended for by the SSJ.  

The literal interpretation of Regulation 30(3)(b) contended for by the Respondent is also, in my judgment, most consistent with the Parliamentary intention of this aspect of the Regulations, namely to compensate the Respondent for the lost pension rights he would have received had he remained in office until age 70. The specific purpose of Regulation 30(3)(b) is to ensure that the RC reflects this shortfall in superannuation benefit: see [37] above.

It is consistent with that purpose, and the natural and fair approach, to deduct from the compensation any sums actually received, for which credit is to be given. Deducting a notional uprated sum, as contended for by the SSJ, involves deducting a sum from which the Respondent never benefited. I agree with Mr Cainer that this would be conceptually and practically unusual. By way of analogy, in a personal injury claim for damages to reflect lost earnings or pension, a deduction would be made for earnings or pension actually received, to calculate the shortfall and thus the net loss to be compensated. To require credit to be given for a higher figure would be unfair to the claimant in that claim. The same is true of the Respondent here: the SSJ’s approach would lead to him being inadequately compensated or “out of pocket”.

It is also pertinent that there was a clear basis for the £88,815.20 not being uprated at the time of payment: pensions increases do not apply to a pension unless the pensioner is aged 55 when it is paid: see the Pensions (Increase) Act 1971, s.3(2)(a). The pension increase (or no increase) applicable when pension benefits are paid is not subsequently revised or uprated again. 

The terms of the Compromise Agreement

Further, the Respondent’s approach is, as the Judge recorded at [70], what “the parties clearly envisaged and recorded in 2004 when the [C]ompromise [A]greement was made”.

The Annex to the Compromise Agreement dated 20 September 2004 set out “[e]stimated figures to be finalised on termination of employment” for each of Resettlement Compensation, LTC and RC.

The RC example at paragraph 3(iv) of the Annex included reference to the RC monthly compensation, from which would be deducted the retirement pension “already receiving [est £29605.08]” [my emphasis]. This was plainly a reference to the amount of the monthly pension the Respondent would receive under the LGPS.

Similarly, paragraph 3(v) referred to the RC lump sum, from which would be deducted “the retirement lump sum paid on 31.1.05” [my emphasis]. This was plainly a reference to the amount of the lump sum the Respondent received under the LGPS in 2005. This much is also clear from the fact that the Compromise Agreement referred to the sum as being estimated at “£888,15.24”. The comma was erroneously inserted, and this should have read £88,815.24, plainly a very close estimate to the amount actually paid to the Respondent of £88,815.20.

The approach contended for by the Respondent to this appeal is also consistent with how other government departments have described their approach. Regulation 30(3) of the Colleges of Education (Compensation) Regulations 1975 is materially identical to the first paragraph of Regulation 30(3)(a)-(b) of the Regulations under consideration in this case. In 1979 a leaflet from the Department for Education and Science stated at paragraph 24 that “when the [RC] lump sum becomes payable it will be reduced by the amount of the lump sum retiring allowance already paid” [my emphasis]: Ford at [5].

Not only has the SSJ’s position has changed throughout these proceedings, but at various points the SSJ appears to have acknowledged that the Respondent’s interpretation of Regulation 30(3)(b) is correct.

For example, in the Employment Tribunal, (i) the SSJ’s Counter Schedule dated 12 November 2024 at [10] stated that the deduction would be “any benefits that [the Respondent] has received under his pension scheme”; (ii) Mr Martin’s witness statement dated 21 January 2025 at [8] and [14] referred to the deduction being “the retirement benefits [the Respondent] actually obtained from [the] office” and the “benefits that he has received under his pension scheme”; and (iii) the SSJ’s Skeleton Argument dated 21 January 2025 at [5] and [10] referred to the deduction of “the retirement benefits [the Respondent] actually obtained from that office” and “any benefits he has received under his pension scheme” [my emphasis throughout]

No persuasive explanation was advanced to the court for the SSJ’s apparent change of position. It rather undermines Mr Heppinstall’s contention that the SSJ’s interpretation was the “obvious” one to adopt.

The reliance placed by the SSJ in this appeal on the words “in respect of any service of which account was taken in calculating the compensation” in Regulation 30(3), set out at [46] above, is a new point not taken below. The Respondent quite fairly did not object to the point being taken, not least because it is a pure legal point and thus less problematic than one requiring further evidence (applying the principles summarised in Rhine Shipping DMCC v Vitol SA [2024] EWCA Civ 580, [2025] 1 All ER (Comm) 97 at [23]-[30]). However, I agree with Mr Cainer that – as the late way in which this point was advanced would suggest – the point is flawed.

The words “in respect of any service of which account was taken”, read in the full context of the wording to Regulation 30(3), are referring back to the service used to calculate the superannuation benefit under the last relevant pension scheme. As the Judge held at [63], “what is in play here is lump sums paid under the pension scheme”. 

Here, the service used to calculate the superannuation benefit under the last relevant pension scheme was the Respondent’s Total Period of Membership of the LGPS, namely 28.34 years. This is to be distinguished from the 43.34 years used to calculate his RC under the Regulations, which, quite separately from how service is calculated under the LGPS, includes the Additional Crombie Service of 15 years calculated by reference to Regulation 17(2). The word “service” is used in the Regulations, rather than, for example, the phrase “total period of membership” which features in the LGPS, because the Regulations apply to a range of pension schemes.

The Respondent’s Total Period of Membership of the LGPS of 28.34 years was “service of which account was taken in calculating the compensation” under the Regulations; albeit that it was not the only such service, because for the purposes of the RC only, account was also taken of the 15 additional Crombie years.

This interpretation is reinforced by (i) an unnumbered floating paragraph subsequent to Regulation 30(3)(b) which refers to “any additional period of service with which the person was credited under his last relevant pension scheme” [my emphasis]; and (ii) the fact that Regulations 30(3)(i) and (ii) refer specifically to reductions made to “any additional period credited to that person under Regulation 17(2)”. This shows that Regulation 30(3) specifically distinguishes between “any service” accrued “under the last relevant pension scheme”, “any additional period of service with which the person was credited under his last relevant pension scheme” and any Crombie Additional Service credited under Regulation 17(2).

If those who drafted the Regulations had intended Crombie Additional Service credited under Regulation 17(2) to be relevant to what is meant by “any service of which account was taken in calculating the compensation” in the first paragraph of Regulation 30(3), this would have been made clear, and it was not.

Accordingly, for all these reasons, the appeal is dismissed. The Respondent is entitled to an RC lump sum of £226,769.93, from which is to be deducted the LGPS lump sum he received of £88,815.20, giving a total of £137,954.73.