Evans & Anor v The Chief Constable of the South Wales Police

This case raises a short point of statutory construction which is potentially important for former police officers who receive police injury pensions.

The question for determination was formulated in a Court Order dated 16^th December 2016 as follows:

The essential issue for determination is whether the level of injury pension payable to a former police officer should be reduced by (a) the amount of additional social security benefits payable in the year in which the former officer retired, or the first year the relevant benefits were paid if only paid after retirement (as the Claimants contend), or (b) the amount of the additional social security benefits actually payable to the former officer in each year (as the Defendant contends).

The answer depends on the meaning of paragraphs 7(1) and (2) of Schedule 3 of the Police (Injury Benefit) Pensions Regulations 2006, and in particular the true construction of the following words in paragraph 7(2):

Police officers injured in the execution of their duty are entitled, in addition to their ordinary pension, to a police injury pension. The payment of such pensions was previously regulated by the Police Pensions Regulations 1987 ("the 1987 Regulations") and is now regulated by the Police (Injury Benefit) Pensions Regulations 2006 ('the 2006 Regulations").

The interstices of the 1987 regime are helpfully set out in paragraphs 11-22 of Mr Beer QC's skeleton argument on behalf of the Defendant. It is not necessary, however, to rehearse these details in this judgment since the 1987 regime is materially similar to the 2006 regime for present purposes. Both the 1987 and 2006 police pension regimes require deductions to be made from the injury pensions paid to qualifying former police officers equivalent to certain social security benefits (see further below).

The First and Second Claimants served as police officers in the South Wales Police for 29 years and 26 years respectively. They were both injured in the course of their duties as police officers and both required to retire in 1999 as a result of those injuries. In addition to their police pensions, they each applied for, and were awarded, police injury pensions under the 1987 Regulations (now the 2006 Regulations).

The level of police injury pension paid is dependent upon the degree of injury and the impact which it has on the earnings capacity of the individual. The 'banding' Table is set out in paragraph 3 of Schedule 7 to the 2006 (and attached at Amex A to this judgment). The Table distinguishes between degrees of disability which calibrate the amount of gratuity and pension paid. The bands are as follows:

The Police Authority determined that the First Claimant had a 40% degree of disablement and was awarded a "Band 2" police injury pension under the 1987 Regulations. The First Claimant was therefore entitled, having regard also to his length of service, to a Minimum Income Guarantee ("MIG") of 70% of his Average Pensionable Pay ("APP").

The Police Authority determined that the Second Claimant had an 80% degree of disablement and was awarded to a "Band 4" police injury pension under the 1987 Regulations. The Second Claimant was therefore entitled, having regard also to his length of service, to a MIG of 85% of his APP.

As a result of the same injuries, the First and Second Claimants also became entitled to social security benefits. They both became entitled to receive Incapacity Benefit ("1B"); and, in addition, the Second Claimant became entitled to Industrial Injuries Disablement Benefit ("IIDB"). The Second Claimant subsequently ceased to receive 1B in 2013 and became entitled to Employment and Support Allowance ("ESA"). A separate issue between the parties regarding the non-deductibility of ESA has been resolved.

The Claimants' income under their police injury pensions will have grown annually sincc 1999 and continues to grow. This is because police injury pensions are indexlinked to the Consumer Prices Index (see regulation 29(1) of the 2006 Regulations and the Pensions (Increase) Act 1971). Injury pension income is free of income tax.

Similarly, the weekly payments that the Claimants have received by way of deductible social security benefits (e.g. 1B and IIDB) have also increased since 1999, and continue to increase. This is because social security benefits are subject to an annual up-rating process (see further below). Payments of 1B, however, attract income tax.

Since 1999, the Claimants' police injury pensions have been reduced by the full amount of the 1B and IIDB payable to each of them by reason of deductions made by the Defendant (the relevant pension provider). The net effect has been to reduce the Claimants' injury pension income each week by a figure equivalent to the 1B and IIDB benefits payable. It is the level of these deductions which the Claimants challenge in these proceedings. The fact that 1B attracts income tax but injury pension does not is, naturally, a significant factor as far as the impact of such deductions is concerned.

Mr Lock QC submitted on behalf of the Claimants that the words in paragraph 7(2) "...the provisions governing scales of additional benefits..." refer to the annual uprating order made by the Secretary of State as part of the annual up-rating of social security benefits. The Claimants' case is that the reference in paragraph 7(2) to the "scales of additional benefits" refers to the actual amounts of additional benefits payable in any particular year and that the deductions for 1B and IIDB were first fixed at the level of benefit payable at the time that they ceased to be police officers in 1999. Their case is that the subsequent change in scale rates as a result of uprating in 2000 as a result of the up-rating Order triggered paragraph 7(2). Accordingly, the Claimants argue the Defendant's regular deductions of higher amounts since 1999 were unlawful and must all be repaid.

Mr Lock QC submitted that the purpose of paragraph 7 was simplicity. He argued that paragraph 7 fixed the level of deduction from the MIG at the level that a defined social security benefit is paid in the year in which a former officer retires, or if the retired officer subsequently becomes entitled to a new deductible benefit, the amount of that benefit in the first year in which it is paid. Accordingly, he submitted, the level of deduction is fixed at the same original figure for as long as the former officer is paid that particular welfare benefit. In the present case, therefore, the level of deduction for 1B for the First Claimant was fixed in 1999 and should have remained the same to date; and the level of deduction for both 1B and IIDB for the Second Claimant was fixed in 1999 and should have remained the same until he ceased to be entitled these social security benefits (in 2013 and 2015 respectively). Accordingly, the Claimants argue the Defendant has improperly operated paragraph 7 and has overdeducted from retired police officers with disability pensions for the past nearly two decades; and these over-deducted sums should be repaid, i.e. for the last 18 years.

Mr Beer QC submitted on behalf of the Defendant that the words of paragraph 7(2) of the 2006 Regulations the provisions governing scales of additional benefits.. referred to the statutory framework governing the uprating of benefits contained in section 150 of the Social Security Administration Act 1992. He submitted that the deductions for 1B and IIDB were intended to reflect the sums actually received by the Claimants by way of social security benefits and the Defendant had lawfully deducted the full amounts of the 1B and IIDB which the Claimants had received weekly since 1999.

Schedule 3 of the 2006 Regulations provides inter alia as follows (emphasis added):

Section 150(3) sets out certain benefits in social security legislation. The effect is that certain benefits are automatically uprated in line with the percentage price increase, whereas in the case of other benefits there is a discretion whether to give effect to that increase or not, and one of the factors the Secretary of State is required to consider in the latter case is the "national economic situation".

Section 150(9) provides that the Secretary of State shall make an order in the form of the draft if it is approved by a resolution of each House.

Claimants' construction would lead to over- or double-recovery.

Second, in my view, the Claimants' construction would be inconsistent with the clear purpose of the balancing mechanism in paragraphs 7(1) and (2) of the 2006 Regulations, which is to ensure that retired police officers are properly compensated for injuries but not over- or double-compensated in respect of the same injury (referred to in paragraphs 3(a) and (b) as "the relevant injury"). Paragraphs 7(1) and (2) are aimed at ensuring like-for-like deductions, i.e. the level of deductions is to match the level of the weekly benefits received.

As explained above, both police injury pensions and social security benefits are subject to regular annual increases. It makes no sense to 'freeze' the deduction for benefits by reference to a notional figure payable nearly 18 years ago, whilst ignoring the annual year-on-year increases in benefits actually paid since then, as well as the annual inflation increases in injury pension also paid since then. As Stephen Lewis, the Head of Exchequer Services of South Wales Police, explains, this would lead to over-recovery by each Claimant in circumstances where there is no clear policy reason for such recovery.

Mr Lock QC relies upon the unfairness resulting from the fact that retired police officers are materially worse off because non-taxable pension income is replaced by taxable benefit income. However, as he himself accepts, there is an element of 'swings and roundabouts' in the police pension scheme, viz. e.g. only some welfare benefits are classified as deductible. On the Claimants' construction, the deductions allowed would be significantly out of kilter with the benefits received over the past nearly two decades and, in effect, allow the Claimants a windfall.

Following the conclusion of the hearing on 8^th June 2017, I reserved judgnent. On 31 ^st July 2017, I circulated my draft judgrnent (in which I found in favour of the Defendant on construction for the above reasons) to both Counsel for typographical corrections in the usual way.

On 2^nd August 2017, Mr Lock QC served written submissions in which, as well as suggesting minor textural corrections, he sought exceptional leave to raise an additional legal argument on behalf of the Claimants. The new point which he sought to raise was that extensive amendments had, in fact, been made to section 150 of the 1992 Act sincc 1999, of which two amendments had a significant bearing on the case and demonstrated, he submitted, the Defendant's analysis on construction was wrong. Mr Lock QC accepted that this point should have been drawn to the Court's attention at the original hearing on 8^th June 2017.

On 18^th September 2017, Mr Beer QC served the Defendant's written response to the Claimant's further submissions. Mr Beer QC did not object to Mr Lock QC's further submissions but submitted that the point did not affect the conclusions in my draft judgment in the Defendant's favour. There was debate between Counsel was to whether Mr Lock QC's point was, in truth, a 'new' point. Mr Beer QC said that it was presaged and covered in the original submissions. However, Counsel were in agreement that the Court was not functus since my draft judgrnent had not been perfected or handed down and that it was appropriate for me to take it into account in my judgment. In these circumstances, and in accordance with overriding objective, I agreed to receive and consider the Claimants' further submissions before finalising and handing down my final judgment. I fixed a further hearing to give both Counsel an opportunity to make oral submissions about the point. This further oral argument took place before me on 30^th October 2017.

Mr Lock QC's new point as explained by him can be summarised as follows. His first submission was that the Defendant's case that section 150 of the 1992 Act had not changed since the Claimants retired in June 1999 was factually incorrect: the Claimants now realised that extensive (some 25) amendments had been made to section 150 since April 2000, two of which were of particular significance:

The first significant amendment was introduced by section 23 of the Welfare Reform Act 2009 which added a new section 2(A) to section 150 as follows:

This change to the terms of section 150 was introduced to enable the government lawfully to decide to introduce an uprating order which would otherwise have been required under the original wording of section 150 because there had been no price increase in that year. This removed the requirement that the Secretary of State find there was an increase in prices before an uprating order was made. The measure only applied to the 2010 process.

The second significant change to section 150 was made by section 97(5) of the Welfare Reform Act 2012 which added the following new section 150(7A) to section 150:

Second, Mr Lock QC submitted that it was clear, therefore, that "the provisions governing scales of additional benefits" under section 150(2) had changed since 1999; and, accordingly, the amount of deduction from their disability should not exceed "the amount which would have been the amount thereof in respect of that week had those provisions not changed'. This meant, he submitted, that the Chief Constable was required to calculate the level of welfare benefit that would have been payable to the former officer if the "provisions" had not changed; and if the result of the recalculation meant the level would be higher under the changed provisions than the unchanged provisions, the deduction had to be capped at the level of deduction under the unchanged provisions. This was because section 150 provided for what Mr Lock QC called a 'five-stage discretionary decision-making process' before the Secretary of State can make the Uprating Order.

Third, accordingly, section 150 sets up a discretionary decision-making process whereby once "changes" are made to section 150, the Chief Constable is required to calculate deductions to pensions on the assumed basis that the changes to the mechanism have not been made. But if changes are made and the new process is used to set the rates of benefits, by definition, the old process is not used. The Chief Constable cannot, by definition, know what discretionary decision would have been made by a combination of the Secretary of State and Parliament by operating the previous decision making machinery. 1--1e does not know, for instance, (i) what would be the outcome of the Secretary of State's review; (ii) whether the Secretary of State would consider that the "increase would be inconsiderable" under section 1 50(4); (iii) whether there would be rounding up or down under section 150(5); (iv) what would be terms of the Uprating Order presented to parliament, i.e. how much more than inflation would the Secretary of State propose as an increase; and (v) whether parliament would have voted to approve the order in this form.

Fourth, where there is a change to the "provisions" (assuming the term "provisions ' refers to section 150) the Chief Constable cannot just keep the deductions at the same rates because he is required to determine what the level of deductions would have been if the changes to section 150 had not been made (not the benefit deduction level at the same rate as the previous year). But, of course, the Chief Constable will never know the answer to that question because it is a discretionary decision making process which, by definition, has not taken place. Different Chief Constables could reach the view that different outcomes would have been reached. Hence different Chief Constables might deduct different sums from police injury pensions

Fifth, police officers retire at different times. If the Defendant is correct, the exercise that the Chief Constable is mandated by the legislation to carry out would be different for each former officer. The Chief Constable would have to calculate what level of benefits would have been payable to that officer if the Secretary of State and Parliament had operated the statutory machinery in the form it existed at the date that each different officer retired. The duty on the Chief Constable to undertake his own decision-making process applies for each "change", regardless of the nature of the "change". Any change can trigger the recalculation and comparison duty for each retired officer. Accordingly, Mr Lock QC submitted that the Defendant's construction would require the Chief Constable to carry out an "impossible" exercise.

Sixth, for these reasons, Mr inck OC submitted that the above analysis of the implications of making "changes " to section 150 demonstrates that Parliament cannot have intended the word "provisions" to refer to the statutory mechanism under section 150. Accordingly, Mr Lock QC submitted the conclusion in the draft judgment should be changed in the Claimants' favour.

Mr Beer QC submitted that there were are four reasons why Mr Lock QC's new point should not cause the Court to change its conclusion:

In my judgment, there are a number ofproblems with Mr Lock QC's further point.

First, Mr Lock QC is wrong to suggest that is that any change to section 150 of the 1992 Act following the officers' retirement in 1999 would trigger an analysis under paragraph 7(2), irrespective of whether it had the effect of increasing or decreasing the benefit in question. As stated above, the words "those provisions " at the end of

Second, to this extent, Mr Lock QC mischaracterises the Defendant's case. Mr Beer

Third, I do not accept Mr Lock QC's fürther subrmsslon on this point that the Defendant's argument that there have been no material changes is 'irrelevant' since Parliament cannot have known what future changes would be made to section 150 and whether future changes would be material or not. It is clear that increases in social security benefits were to be anticipated (see further below).

Fourth, Mr Lock QC is not correct to assert that, in the event of a relevant change to section 150 giving rise to an increase in weekly benefits paid, the Chief Constable would have to conduct a complicated 'shadow' analysis or calculation as to how the Secretary of State might exercise his or her discretion and assess (or guess) by how much the benefits in question might be increased by the Secretary of State as a result of the new provision. In my view, the way in which paragraph 7(2) is intended to operate is, in fact, relatively simple: any increase to weekly benefits as a resulting from a change to section 150 is to be disregarded. This is the effect of the words of paragraph 7(2): " ...the amount of the reduction in respect of any week on account of a particular benefit shall not exceed the amount which would have been the amount thereof in respect ofthat week had those provisions not changed... ". Any increase as a result of the new provision changing "the provisions governing scales of additional benefits " is simply to be ignored. No difficulty should normally arise in determining the figure payable under the pre-existing legislation. The figure will normally be known or a matter of record. In any event, the Chief Constable can check with the relevant government department.

Fifth, thus, in my view, no difficulty arises in relation to either of the amendments to section 150 relied upon by Mr Lock QC, i.e. neither section 150(2A) added by section 23 of the Welfare Reform Act 2009 nor section 150(7A) added by section 97(5) of the Welfare Reform Act 2012. If and insofar as either led to increases in benefits paid or payable over and above what would have been payable under the previous legislation, the Chief Constable would have no difficulty in establishing the amount payable had those provisions not changed (and, indeed he clearly did so).

Sixth, Mr Lock QC's submission ignores the knowledge that Parliament must be taken to have had when it the 2006 Regulations. The Pensions (Increase) Act 1971 created a link between public sector pensions and certain state benefits and made provision for the increase of police injury pensions at the same level as any rise in benefit payments. As Elias LJ said in The Staff Side of the Police Negotiating Board The Secretary ofStatefor Work and Pensions [2011] EWHC 3175:

The 2006 Regulations came into force on 6^th April 2006 and provided for the Secretary of State to lay before Parliament an uprating order which increased benefits by no less than the general level of the increase in prices under the Retail Price Index. When Parliament enacted the 2006 Regulations it knew, or is to be taken as knowing, that the injury pensions provided for under it would be increased at the same level of increase that would be applied to the benefits that any pensioner officers would receive. However, the effect of the Claimants' construction is that, on the one hand Parliament introduced a mechanism which provided for the deduction of such benefits by paragraph 7(1), but on the other hand Parliament immediately defeated that essential mechanism by dis-applying it by paragraph 7(2) if the benefits increased (as they were bound to do). This makes little sense and would be a strange way to legislate in circumstances where Parliament can be taken to have understood and anticipated that benefits would be increased when it enacted the 2006 Regulations.

In my judgment, it is clear that benefit increases were likely to be matched by pension increases so that they did not get out of step with each other; and Parliament enacted paragraph 7(2) to protect officers so that if the measure of increase in pension payments changed in the future to a level lower than that set out in section 150(2) then the deduction would only be that which fell to be made before the amendment.

Seventh, the Claimants' construction could have been achieved by a simple provision that said that a fixed deduction falls to be made from an officer's injury pension that is set at the level of the retirement benefits to which he was entitled in the year of his retirement.

Eighth, and finally, Mr Lock QC's new point fails to meet or address the three imperatives of statutory interpretation which I have referred to and analysed above which are in my view determinative in this case, namely, (a) the text is the primary indication of Parliament's intended meaning, (b) the consequences of a particular construction would lead to over-recovery, and (c) the need to achieve a purposive construction (see paragraphs 26-40 above).