Walker (Appellant) v Innospec Limited and others (Respondents)

Hand-down Date:July 12, 2017
Cite as:[2017] UKSC 47
 
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Trinity Term [2017] UKSC 47 On appeal from: [2015] EWCA Civ 1000

JUDGMENT

Walker (Appellant) v Innospec Limited and others (Respondents) before

Lady Hale, Deputy President Lord Kerr

Lord Reed

Lord Carnwath Lord Hughes JUDGMENT GIVEN ON 12 July 2017 Heard on 8 and 9 March 2017 Appellant Respondent Martin Chamberlain QC

Nicholas Randall QC Claire Darwin (Instructed by Eversheds Sutherland (International)

LLP (Manchester)) Max Schaefer

(Instructed by Liberty)

Interested Party (Secretary of State for Work and Pensions)

Jason Coppel QC Holly Stout (Instructed by The Government Legal

Department) LORD KERR: (with whom Lady Hale and Lord Reed agree)

  1. John Walker, the appellant in these proceedings, started to work for Innospec Ltd on 2 January 1980. From the beginning of his employment, he was required to become a member of the firm's contributory pension scheme. He continued to pay into the scheme throughout the time that he was employed by Innospec. His employment continued until Mr Walker accepted early retirement on 31 March 2003. He would have reached normal retirement age, as prescribed by the pension scheme, in 2007.

  2. Under the terms on which Mr Walker could take early retirement, he was able to maximise his pension to the level that it would have reached if he had retired in 2007. The concessions made by his employer which allowed him to do so were not made in exchange for any waiver by him of his future pension rights.

  3. Mr Walker is gay. He has lived with his male partner since 1993. They applied for a civil partnership on 5 December 2005 (the same day the Civil Partnership Act 2004 came into force) and their civil partnership was registered on

    23 January 2006. They are now married.

  4. Shortly after the civil partnership was registered, Mr Walker asked Innospec to confirm that, in the event of his death, they would pay the spouse's pension, which the scheme provides for, to his civil partner. They refused, because his service predated 5 December 2005. The basis of the refusal (which was confirmed after Mr Walker and his partner married) is paragraph 18 of Schedule 9 to the Equality Act 2010. This provision must be considered in greater detail later in this judgment but, in broad outline, it provides an exception to the general non-discrimination rule implied into occupational pension schemes. Under this exception, it is lawful to prevent or restrict access to a benefit, facility or service to a person (a) where the right to that benefit etc accrued before 5 December 2005, or (b) which is payable in respect of periods of service before that date.

  5. If Mr Walker was married to a woman, or, indeed, if he married a woman in the future, she would be entitled on his death to the pension provided by the scheme to a surviving spouse. When the claim was issued, the value of that "spouse's pension" was about £45,700 per annum. As things stand at present, Mr Walker's husband will be entitled to a pension of about £1,000 per annum (the statutory guaranteed minimum).

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    The proceedings

  6. In November 2011, Mr Walker lodged a claim in the Employment Tribunal (ET) against his employers, alleging that they had discriminated against him on the ground of his sexual orientation. On 13 November 2012, the ET unanimously decided that there had been both direct and indirect discrimination on that ground. It had been argued on behalf of the respondents that there had not been direct discrimination and that, although the operation of the pension scheme amounted to indirect discrimination, this was justified. Both arguments were rejected by the ET. The discrimination was direct, the ET said, in that it involved unequal treatment of straightforwardly comparable individuals viz heterosexual married couples and same sex couples who had entered a lifetime commitment to each other. It was likewise indirect discrimination because an unwarranted requirement had been imposed in respect of the couple of the same gender. The proffered justification by the respondents (that it was necessary to have the restriction in place in order to ensure proper funding of the scheme) was found by the ET to be unsupported by sufficiently cogent evidence.

  7. The ET concluded that paragraph 18 could and should be read in a manner which would render it compliant with Council Directive 2000/78/EC of 27 November 2000 [2000] OJ L 303/16 (the Framework Directive). This establishes a general framework for equal treatment in employment and occupation. It therefore upheld Mr Walker's claim on liability and fixed a date for a remedies hearing.

  8. Innospec appealed. Its arguments on direct and indirect discrimination failed. The Employment Appeal Tribunal (EAT) rejected the argument that because, as a matter of status, a spouse is entitled to a pension or survivor's benefit without the restriction which paragraph 18 places upon a civil partner, they were not comparable: [2014] ICR 645. The EAT's dismissal of the argument drew on section 23(3) of the Equality Act 2010 which provides that if the protected characteristic is sexual orientation, the fact that one person "is a civil partner while another is married is not a material difference between the circumstances relating to each case" and on the statement of Lady Hale in Bull v Hall [2013] UKSC 73; [2013] 1 WLR 3741, para 29, to the effect that the "criterion of marriage or civil partnership [should be regarded] as indissociable from the sexual orientation of those who qualify to enter it". On the question of indirect discrimination, the EAT held that the ET was entitled to conclude that Innospec had failed to produce any cogent evidence on the issue of justification but had merely relied on generalised assertions. It had thus failed to show that the indirect discrimination was proportionate.

  9. The EAT allowed Innospec's appeal, however. It held that the Framework Directive did not have retrospective effect to render unlawful inequalities based on sexual orientation that arose before the last date for its transposition. After that date

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    the Directive provided a basis for ensuring equal treatment between those with different sexual orientation but not before. Paragraph 18 was therefore not incompatible with the Directive.

  10. The EAT further held that if, contrary to its view, paragraph 18 was, on its face, incompatible with the Directive, it was not open to it to interpret that provision in a way that rendered it compatible. The plain purpose of the paragraph was to create an exception. To nullify that exception would run directly contrary to the "grain" of the legislation (Ghaidan v Godin-Mendoza [2004] 2 AC 557). It was also held that paragraph 18 could not be disapplied. In reaching that conclusion, the EAT referred to the judgment of Lord Mance in R (Chester) v Secretary of State for Justice [2013] UKSC 63; [2014] AC 271, at paras 61-62 where he said:

    "The Court of Justice has accepted that, although the Treaty contemplates that the general principle of non-discrimination underlying article 13 EC will be implemented by Directives, member states will be bound thereby to discontinue, disregard or set aside measures so far as they involve discrimination on a basis contrary to article 13 at least after the time for transposition of such a Directive: Kücükdeveci v Swedex GmbH and Co KG (Case C-555/07) [2010] All ER (EC) 867, Römer v Freie und Hansestadt Hamburg (Case C-147/08) [2011] ECR I-3591, para 61 ... however, for the general principle of nondiscrimination to apply, the context must fall within the scope of Community or now Union law ..."

    The EAT considered that Mr Walker's claim, in so far as it related to an asserted entitlement to spousal pension, could not be brought within the scope of European Union (EU) law in respect of the period prior to the time limit for transposing the Framework Directive.

  11. Mr Walker appealed the EAT's decision. In the Court of Appeal the Secretary of State argued that the EAT was wrong in its conclusion on direct discrimination. In effect, he repeated the argument advanced by Innospec to the EAT that civil partners and married persons are not "in a comparable position" in respect of pension rights because paragraph 18 itself created a difference in status between the two groups. That argument was rejected, Lewison and Underhill LJJ finding that civil partnership and marriage were indeed comparable situations in the UK and Lord Dyson MR agreeing with both: [2016] ICR 182.

  12. The Court of Appeal nevertheless dismissed Mr Walker's appeal. At the outset, Lewison LJ identified what he described as two relevant principles of EU

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    law. These were said to be the "no retroactivity" principle and the "future effects" principle. Lewison LJ described the first of these principles as prescribing that "EU legislation does not have retroactive effect unless, exceptionally, it is clear from its terms or general scheme that the legislator intended such an effect, that the purpose to be achieved so requires and that the legitimate expectations of those concerned are duly respected" - para 5 of his judgment. Because the Court of Appeal found that to require payment of a spouse's pension to Mr Walker's husband, after Mr Walker's death, would be to give the Framework Directive retrospective effect, it concluded that the no retroactivity principle precluded this. The second principle was said to be that amending legislation applies immediately to the future effects of a situation which arose under the law as it stood before amendment, unless there was a specific provision to the contrary - again para 5.

  13. The application of those principles by the Court of Appeal is central to their decision. They underpin critically their conclusion that the Framework Directive's prohibition of discrimination on grounds of sexual orientation applies only to pension payable in the future in respect of service and/or contributions paid prior to

    2 December 2003, the deadline for its transposition. In turn that conclusion depends vitally on...

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