Trinity Term [2017] UKSC 46 On appeal from: [2015] EWCA Civ 1000

JUDGMENT
O’Brien (Appellant) v Ministry of Justice
(Respondent)
before
Lady Hale, Deputy President
Lord Kerr
Lord Reed
Lord Carnwath
Lord Hughes
JUDGMENT GIVEN ON
12 July 2017
Heard on 7 July 2016, 8 and 9 March 2017
Appellant Respondent
Robin Allen QC John Cavanagh QC
Rachel Crasnow QC Charles Bourne QC
Tamar Burton Rachel Kamm
(Instructed by Browne
Jacobson LLP
)
(Instructed by The
Government Legal
Department
)
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LORD REED: (with whom Lady Hale, Lord Kerr, Lord Carnwath and Lord
Hughes agree)
Introduction
1. This appeal raises a question relating to the temporal scope of Council
Directive 97/81/EC of 15 December 1997, 1998 OJ L14/9, concerning the
Framework Agreement on part-time work (“the directive”) as extended to the United
Kingdom by Council Directive 98/23/EC of 7 April 1998, 1998 OJ L131/10, and
the general principles of EU law governing the non-retroactivity of legislation.
2. The question arises in the context of proceedings between Mr Dermod
O’Brien QC and the Ministry of Justice concerning the pension to which Mr O’Brien
is entitled by reason of his part-time service in a judicial office.
3. In essence, the question is whether, where a part-time worker retires after the
entry into force of the directive and is entitled under the directive, taken together
with national law, to an occupational pension based on his length of service, periods
of service which were completed before the directive entered into force should be
taken into account.
The facts
4. The material facts are as follows. Mr O’Brien is a retired self-employed
barrister who also held part-time judicial office as a recorder (a part-time judge of
the Crown Court) between 1 March 1978 and 31 March 2005, when he retired at the
age of 65. Recorders were not salaried but were paid fees on a per diem basis. There
was no provision for the payment of a judicial pension on retirement.
5. In June 2005 Mr O’Brien wrote to the Ministry, requiring that he be paid a
retirement pension on the same basis, adjusted pro rata temporis, as that paid to
former full-time judges who had been engaged on the same or similar work. He was
informed by the Ministry that he fell outside the categories of judicial office-holder
to whom a judicial pension was payable. In September 2005 he began proceedings
in the Employment Tribunal, in which he claimed that he was entitled to a judicial
pension by virtue of the directive and the regulations transposing it into domestic
law.
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6. On 28 July 2010 the Supreme Court referred two questions to the Court of
Justice for a preliminary ruling under article 267 TFEU:
“(1) Is it for national law to determine whether or not judges
as a whole are ‘workers who have an employment contract or
employment relationship’ within the meaning of clause 2.1 of
the Framework Agreement, or is there a Community norm by
which this matter must be determined?
(2) If judges as a whole are workers who have an
employment contract or employment relationship within the
meaning of clause 2.1 of the Framework Agreement, is it
permissible for national law to discriminate (a) between fulltime and part-time judges, or (b) between different kinds of
part-time judges in the provision of pensions?”
7. On 1 March 2012 the Second Chamber of the Court of Justice, having
received the opinion of the Advocate General (Kokott) on 17 November 2011, gave
judgment: O’Brien (Case C-393/10) [2012] 2 CMLR 25. It answered the questions
as follows:
“(1) European Union law must be interpreted as meaning
that it is for the member states to define the concept of ‘workers
who have an employment contract or an employment
relationship’ in clause 2.1 of the Framework Agreement … and
in particular, to determine whether judges fall within that
concept, subject to the condition that that does not lead to the
arbitrary exclusion of that category of persons from the
protection offered by Directive 97/81, as amended by Directive
98/23, and that agreement. An exclusion from that protection
may be allowed only if the relationship between judges and the
Ministry of Justice is, by its nature, substantially different from
that between employers and their employees falling, according
to national law, under the category of workers.
(2) The Framework Agreement … must be interpreted as
meaning that it precludes, for the purpose of access to the
retirement pension scheme, national law from establishing a
distinction between full-time judges and part-time judges
remunerated on a daily fee-paid basis, unless such a difference
in treatment is justified by objective reasons, which is a matter
for the referring court to determine.”
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8. Following that ruling, the Supreme Court held that Mr O’Brien was at the
material time a part-time worker within the meaning of clause 2.1 of the Framework
Agreement, and that no objective justification had been shown for departing from
the principle of remunerating fee-paid part-time judges on the same basis as fulltime judges, subject to adjustment pro rata temporis. Mr O’Brien was therefore
entitled to a pension on terms equivalent to a circuit judge (a comparable full-time
judge): [2013] UKSC 6; [2013] 1 WLR 522.
9. The case was remitted to the Employment Tribunal for determination of the
amount of the pension to which Mr O’Brien was entitled. The question which then
arose was whether, in calculating the amount of his pension, account should be taken
of the whole of his service since the beginning of his appointment on 1 March 1978
(a period of 27 years), or only his service since the deadline for transposing the
directive expired (a period of less than five years). The Employment Tribunal held
that the calculation should take into account the whole of his service, but the
Employment Appeal Tribunal held the contrary: [2014] ICR 773. The Court of
Appeal upheld the decision of the Employment Appeal Tribunal: [2015] EWCA Civ
1000; [2016] 1 CMLR 28. Mr O’Brien now appeals to the Supreme Court.
The legal context
(a) National law
10. Domestic legislation provides for the payment of judicial pensions under two
statutes, the Judicial Pensions Act 1981 and the Judicial Pensions and Retirement
Act 1993. The 1981 Act applies to persons appointed prior to 31 March 1995, unless
they elect to have their pension paid under the 1993 Act. The 1993 Act applies to
persons appointed on or after 31 March 1995. Under the Acts, a pension is payable
to any person retiring from “qualifying judicial office”, subject to their having
attained the age of 65 and, under the 1993 Act, subject also to their having completed
at least five years’ service in such office. At the material time, full-time judges and
salaried part-time judges held a qualifying judicial office, but fee-paid part-time
judges, such as recorders, did not. Under both schemes, the amount of pension
payable to a full-time judge is based on his or her final year’s salary and on his or
her number of years’ service in a qualifying judicial office by the date of retirement.
Under the 1981 Act, circuit judges must have served for 15 years in order to qualify
for a full pension of one half of their last annual salary. The corresponding period
under the 1993 Act is 20 years. Under both schemes, judges who have served for
shorter periods receive a proportion of the full pension corresponding to the length
of their service. There is also a lump sum payable on retirement, the sum being based
on the amount of the annual pension. Judicial pensions were at the material time
non-contributory. Since 2012, judges have had to pay a contribution.
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11. The United Kingdom gave effect to the directive by the Part-Time Workers
(Prevention of Less Favourable Treatment) Regulations 2000 (SI 2000/1551), which
came into force on 1 July 2000. The Regulations provide that a part-time worker has
the right not to be treated by his employer less favourably than the employer treats
a comparable full-time worker. In determining whether a part-time worker has been
treated less favourably than a comparable full-time worker, the pro rata principle is
to be applied unless it is inappropriate. The Regulations expressly do not apply to
fee-paid part-time judges.
(b) Relevant EU law
12. In European Commission v Moravia Gas Storage AS (Case C-596/13 P)
[2015] 3 CMLR 17, para 32, the Court of Justice stated:
“A new rule of law applies from the entry into force of the act
introducing it, and, while it does not apply to legal situations
that have arisen and become definitive under the old law, it
does apply to their future effects, and to new legal situations. It
is otherwise, subject to the principle of the non-retroactivity of
legal acts, only if the new rule is accompanied by special
provisions which specifically lay down its conditions of
temporal application.”
13. The Court applied that principle in the context of the directive in Istituto
Nazionale della Previdenza Sociale (INPS) v Bruno (Joined Cases C-395/08 and C396/08) [2010] ECR I-5119, where the question arose whether service prior to the
entry into force of the directive counted towards the service required to qualify for
a retirement pension. The Court cited the principle that “new rules apply, unless
otherwise specifically provided, immediately to the future effects of a situation
which arose under the old rule” (para 53), and concluded:
“Accordingly, the calculation of the period of service required
to qualify for a retirement pension such as the pensions at issue
in the main proceedings is governed by Directive 97/81,
including periods of employment before the directive entered
into force.” (para 55)
14. The Court cited that judgment when rejecting an objection to the
admissibility of the first preliminary reference in the present proceedings. In
O’Brien (Case C-393/10) [2012] ICR 955, the Court stated:
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“24. The Latvian Government doubts whether the reference
for a preliminary ruling is admissible. It is contrary to the
principle of the protection of legitimate expectations and the
principle of legal certainty to hold that Directive 97/81 may
apply to facts which took place before the entry into force of
that directive in the United Kingdom and which continued for
a short time after its entry into force, even if the right to a
retirement pension claimed by Mr O’Brien arose after the
expiry of the time-limit for transposing Directive 97/81.
25. The Court has already declared, as regards the
applicability ratione temporis of that directive that new rules
apply, unless otherwise specifically provided, immediately to
the future effects of a situation which arose under the old rule.
Thus the Court concluded that the calculation of the period of
service required to qualify for a retirement pension is governed
by Directive 97/81, including periods of employment before
the directive entered into force (Joined Cases C-395/08 and C396/08 Bruno [2010] ECR I-5119, paras 53 to 55).
26. Consequently, the reference for a preliminary ruling
must be declared admissible.”
15. The Court has treated occupational pensions as a form of pay, the entitlement
to which accrues over the length of the employee’s service. In Ten Oever v Stichting
Bedrijfspensionenfonds voor her Glazenwassers en Schoonmaakbedrijf (Case C109/91) [1993] ECR I-4879, the Court stated, in relation to its Barber v Guardian
Royal Exchange Assurance Group judgment (Case C-262/88) [1990] ECR I-1889:
“17. The Court’s ruling took account of the fact that it is a
characteristic of this form of pay [scil, benefits provided for by
private occupational pension schemes] that there is a time-lag
between the accrual of entitlement to the pension, which occurs
gradually throughout the employee’s working life, and its
actual payment, which is deferred until a particular age.

19. Given the reasons explained in para 44 of the Barber
judgment for limiting its effects in time, it must be made clear
that equality of treatment in the matter of occupational pensions
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may be claimed only in relation to benefits payable in respect
of periods of employment subsequent to 17 May 1990, the date
of the Barber judgment …”
(c) Summary of arguments of parties
16. The fundamental difference between the parties is as to whether Mr
O’Brien’s entitlement to a pension in respect of his service prior to 7 April 2000 (the
final date for transposition of the directive) should be regarded as a legal situation
which arose and became definitive under the law then in force, or should be regarded
as one of the future effects of a legal situation which arose under the old law, to
which the directive therefore applies.
17. Mr O’Brien argues that the reasoning in the Bruno and O’Brien judgments
implies that periods of employment before the directive entered into force are to be
taken into account when applying the directive in situations which arise after it
should have been transposed. In particular, they are relevant not only to qualification
for a retirement pension (which the Ministry does not dispute), but also to the
quantification of that pension, where its quantification is based on the employee’s
length of service.
18. The Ministry argue that since, following Ten Oever, a pension payable under
an occupational pension scheme constitutes deferred pay for past work, and the
worker’s entitlement to pension accrues at the time of the work for which it
constitutes pay, it follows from the non-retroactivity principle that the accrued right
cannot be affected retrospectively by a change in the law. The entitlement is
permanently fixed at the time when the right accrues, rather than being determined
when the person retires and the pension becomes payable. On that basis, it is argued
that Mr O’Brien’s non-entitlement to pension in respect of his first 22 years of
service was definitively established before the directive entered into force.
(d) The view of the national court
19. The majority of the court are inclined to think that the effect of Directive
97/81 is that it is unlawful to discriminate against part-time workers when a
retirement pension falls due for payment. The directive applies ratione temporis
where the pension falls due for payment after the directive has entered into force. In
so far as part of the period of service took place prior to the directive’s entry into
force, the directive applies to the future effects of that situation.
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20. However, the Court of Justice has not as yet considered the argument that if,
following the Ten Oever line of authority, an occupational pension is treated as
deferred pay, the right to which is acquired at the time of the work to which the pay
relates, then it follows from the general principle of non-retroactivity that the
directive does not alter or affect rights acquired (or, in Mr O’Brien’s case, not
acquired) before it was brought into force, there being no provision in the directive
which overrides that general principle. Although the majority of the court are
inclined to think that Ten Oever was concerned with the exceptional Barber
limitation, which does not arise in the present context, the correct approach does not
appear to the Supreme Court to be acte clair.
The question referred
21. The Supreme Court has therefore concluded that it is necessary to refer the
following question to the Court of Justice:
Does Directive 97/81, and in particular clause 4 of the Framework Agreement
annexed thereto concerning the principle of non-discrimination, require that
periods of service prior to the deadline for transposing the Directive should
be taken into account when calculating the amount of the retirement pension
of a part-time worker, if they would be taken into account when calculating
the pension of a comparable full-time worker?