Monday 13 July 2020
Closing the Barber window once and for all: Safeway Limited v (1) Andrew Newton and (2) Safeway Pension Trustees Limited  EWCA Civ 869
On 13 July 2020, the Court of Appeal handed down judgment confirming unanimously that the introduction of s.62 of the Pensions Act 1995 (“s.62”) was a domestic law measure that closed the Barber window with effect from 1 January 1996.
The Claimant, the employer of the Safeway Pension Scheme (the “Scheme”), had brought proceedings to determine whether the Normal Pension Ages (“NPAs”) of members had been validly increased to 65 with effect from 1 December 1991, either in accordance with the 1991 Announcements to members or as a result of the terms of the 1996 Trust Deed dated 2 May 1996 having had retrospective effect to 1 December 1991.
In an earlier hearing before the Court of Appeal ( EWCA Civ 1482), the Court had concluded that, whilst the 1991 Announcements were not in themselves sufficient to amend NPAs, the 1996 Trust Deed was capable under domestic law of retrospectively amending NPAs to 65 with effect from 1 December 1991 and there was an open question of EU law as to whether such a retrospective amendment was prohibited by what was at the time Article 119 of the Treaty of Rome (“Article 119”). In deciding to refer this question to the Court of Justice of the European Union (the “CJEU”), the Court of Appeal overruled the decision of Mr Justice Warren both at first instance and in Harland & Wolff Pension Trustees Limited v Aon Consulting Financial Services Ltd  EWHC 1778 (Ch) that it was acte clair that there was such a prohibition on retrospective “levelling down” even where the underlying benefits that were accruing during the Barber window were defeasible benefits, in the sense of always being subject under domestic law to retrospective reduction by a valid exercise of the Scheme’s amendment power.
The Grand Chamber of the CJEU delivered its judgment on 7 October 2019, concluding that there was such a prohibition under EU law, even where the rights accruing were defeasible rights under domestic law.
The key question in each case was when did the Barber window close?
The answer given by the CJEU was that the Barber window did not close until a measure was introduced into domestic law that brought about legally enforceable rights and remedies to Article 119 compliant benefits.
Prior to the date of those measures being introduced (referred to as “the past” or “Period 2”), Article 119 required that the benefits of the disadvantaged class accruing during that period had to be treated as “levelled up” to the benefits of the advantaged class (and could not then be reduced even if the benefits of the advantaged class accruing during that preiod were themselves defeasible) on the basis that, in the absence of Article 119 having been implemented into domestic law, those right formed the only valid frame or system of reference. Once Article 119 had been implemented into domestic law (referred to as “the future” or “Period 3”), then all that Article 119 required was equal treatment and it was a matter of domestic law policy as to what the level of those benefits ought to be.
The final issue left over for the Court of Appeal pending the outcome of the hearing before CJEU was whether the introduction of s.62 as a matter of domestic legislation could itself have closed the Barber window.
The argument advanced by the Claimant was that – even if EU law precluded the 1996 Trust Deed from having its domestic law effect of retrospectively reducing benefits during the Barber window – the Barber window closed on the introduction of s.62 with effect from 1 January 1996. What this meant was that “the past” ended on 31 December 1995 and “the future” began on 1 January 1996, with the result that Article 119 only prohibited the 1996 Trust Deed from retrospectively increasing NPAs to 65 for the period between 1 December 1991 and 31 December 1995, not for the period between 1 January 1996 and 2 May 1996, which period was governed exclusively by domestic law.
The Court of Appeal were unanimous in accepting these arguments.
It concluded that the Claimant was right in contending that:
- The domestic law effect of s.62 was to introduce into every occupational pension scheme an equal treatment rule that brought domestic law into compliance with the requirements of Article 119.
- This satisfied the “litmus test” laid down by the CJEU for the closing of the Barber window in terms of introducing into domestic law legally enforceable rights and remedies to benefits that complied with Article 119.
- The reason that the introduction of legally enforceable rights and remedies under domestic law was the litmus test for closing the Barber window was that it marked the transition from Member State non-compliance (where the rights and remedies had to be supplied by Article 119) to Member State compliance (where the rights and remedies were supplied by domestic law) which marked the transition from “the past” to “the future”.
- It could not make a difference whether those legally enforceable rights and remedies were imposed by statute or derived from textual amendments to the governing documentation of the Scheme brought about by the exercise of the Scheme’s amendment power.
This is an important decision in the narrative of equalisation because it confirms for the first time that the introduction of s.62 was a domestic law measure capable of closing the Barber window for any occupational pension scheme where the Barber window was still open on 1 January 1996.
The wider practical effect of this within the industry will need to be considered.
The range of schemes affected by this development is unlikely to be great given that it will only impact those schemes which sought (consistently with their own governing documentation) retrospective changes to the NPAs of members and only then if such retrospective changes were made after 1 January 1996 and before the introduction of s.67 of the Pensions Act 1995 with effect from 6 April 1997. Yet for any scheme that does meet those criteria, there is clearly the welcome potential for this decision to result in a material reduction in liabilities.
Sebastian Allen acted for the successful appellant, Safeway Ltd, instructed by DWF LLP.
Please click here to download a copy of the judgment.
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