Safeway v Newton [2017] EWCA Civ 1482

In its judgment in Safeway v Newton [2017] EWCA Civ 1482, the Court of Appeal held that Harland & Wolff Pension Trustees Limited v Aon Consulting Financial Services Ltd [2006] EWHC 1778 (Ch) had been wrongly decided and that the very issue for which it had stood as authority should be referred to the Court of Justice of the European Union (“CJEU”) for determination.

This was a failed equalisation case where the trustees and sponsoring employer of the Safeway Pension Scheme (“the Scheme”) had sought by written announcement dated 1 December 1991 to raise the Normal Pension Ages (“NPAs”) of women to NPA 65 so that they had the same NPAs as men. The written announcement was followed by a consolidation deed executed on 2 May 1996 which brought the trust deed and rules of the Scheme up to date in a variety of respects, including prescribing NPAs of 65 for men and women with effect from 1 December 1991.

The Court of Appeal found that the amendment power of the Scheme required any amendment to be made by deed and so the written announcement had not in itself been sufficient to change members’ benefits.

The question was whether the deed dated 2 May 1996 was valid in retrospectively reducing members’ benefits by increasing the NPAs of women with effect from 1 December 1991. The amendment power permitted retrospective amendments to be made to members’ benefits back to the date of a prior written announcement as a matter of domestic law and because the amendment was made prior to s.67 of the Pensions Act 1995 coming into force on 6 April 1997 there was no statutory obstacle to such a retrospective amendment being made. The question was whether such a retrospective amendment was permissible as a matter of EU law and, specifically, whether it was precluded by the decision of what is now the CJEU in Smith v Avdel Systems Ltd (Case C-408/92) [1995] ICR 596.

The domestic law decision in Harland & Wolff had stood as authority for the proposition that the decision in Smith v Avdel required that benefits accruing during the “Barber window” (that is between the date of the decision in Barber and the date on which “measures” were brought into force to bring about equalisation) had to be “levelled up” and could not be “levelled down”, even where there was a domestic law power to reduce benefits during that period which had been exercised.

Brian Green QC and Sebastian Allen who acted for Safeway, argued that Harland & Wolff had been wrongly decided because the proposition for which it stood as authority was not in fact supported by the decision in Smith v Avdel and indeed was inconsistent with well-established principles of EU law.

The Court of Appeal agreed that Harland & Wolff had been wrongly decided and concluded that Smith v Avdel could not safely be relied upon as supporting the conclusion that EU law prohibited “levelled up” benefits that were defeasible as a matter of domestic law from being defeased. The Court of Appeal agreed that the quality of the domestic law benefits (i.e. whether they were defeasible or indefeasible) had not been considered in Smith v Avdel and concluded that there was consequently an open question of EU law that needed to be referred to the CJEU for determination.

Download the full judgment here.