Pensions

Pension scheme - contractual entitlement to gratuity on retirement - clear language required for subordinate legislation to have retrospective effect abrogating pre-existing contractual entitlement

Nicholls v Greenwich London Borough Council: CA (Dame Elizabeth Butler-Sloss, Lord Justice Mummery and Lord Justice May): 3 April 2003

The applicant was employed by a local authority from 1982 until her retirement in 2000.

At the time of entering into the contract of employment the entitlement to payment of gratuity on retirement would have fallen within the then applicable regulations, but the applicant came to retire the employer claimed that subsequent regulations (and in particular the Local Government (Discretionary Payments) Regulations 1996) imposed a statutory cap below the sum to which she was ostensibly entitled, and declined to pay the sum claimed.

The employment tribunal dismissed her claim for the sum.

The Employment Appeal Tribunal upheld that decision.

The claimant appealed.

Held, allowing the appeal, that the court looked to fairness and the principle that, in the absence of clear language to the contrary, legislation, and in particular subordinate legislation, should not be construed to operate retrospectively to the detriment of a substantive private right, being in the instant case the right to be paid the full gratuity promised where the contract relied on pre-dated the relevant regulations; that, assuming that the secretary of state was empowered to make regulations with respect to contractual gratuities framed so as to take effect from a date earlier than the making of the regulations and prohibiting payment of gratuities from being made under existing contracts, nevertheless on a true construction there was nothing in the language of the 1996 regulations clearly applying the new statutory cap retrospectively to a pre-existing entitlement which fell for payment after the regulations had been made; and that, accordingly, the applicant was entitled to the sum claimed.