Walker v Innospec Ltd & Ors [2017] UKSC 47

John Walker, a gay man, was denied confirmation that his civil partner (later husband) would receive the full spouse's pension on his death, because his service predated 5 December 2005. The Supreme Court held this restriction incompatible with the Framework Directive and disapplied it.

Facts

John Walker was employed by Innospec Ltd from January 1980 until taking early retirement on 31 March 2003, contributing throughout to his employer’s occupational pension scheme. Mr Walker is gay and has lived with his male partner since 1993. They entered a civil partnership in January 2006 and subsequently married. Mr Walker asked Innospec to confirm that, on his death, the spouse’s pension provided by the scheme would be paid to his partner. Innospec refused, relying on paragraph 18 of Schedule 9 to the Equality Act 2010, which permits employers to restrict access to benefits where the right accrued before 5 December 2005 or which is payable in respect of periods of service before that date. Had Mr Walker been married to a woman, she would have been entitled to a spouse’s pension of about £45,700 per annum; his husband would receive only the statutory guaranteed minimum of about £1,000 per annum.

Issues

The appellant identified three principal issues:

• Whether the differential treatment provided for by paragraph 18 of Schedule 9 is compatible with Council Directive 2000/78/EC (the Framework Directive).
• If incompatible, whether paragraph 18 must nonetheless be given effect or whether it must be disapplied.
• Whether a declaration of incompatibility under section 4 of the Human Rights Act 1998 should be made.

Arguments

Appellant

Martin Chamberlain QC submitted that the Court of Appeal had misconstrued the CJEU jurisprudence. The line of cases beginning with Defrenne II and Barber concerned exceptional temporal limitations imposed on the retrospective application of judgments on equal pay, introduced to avoid catastrophic financial consequences. They did not establish a general rule that EU legislation should not apply immediately to ongoing situations. He relied on Maruko and Römer as establishing that survivor’s pensions calculated by reference to service predating the Directive’s transposition deadline must nonetheless comply with the prohibition on sexual orientation discrimination when payable.

Respondent and Secretary of State

Innospec and the Secretary of State argued that requiring payment of a spouse’s pension to Mr Walker’s husband would give the Framework Directive retrospective effect, contrary to the “no retroactivity” principle. Pension entitlement became “permanently fixed” as it was earned, so service before the transposition deadline (2 December 2003) and before paragraph 18’s cut-off (5 December 2005) fell outside the temporal scope of the Directive.

Judgment

Lord Kerr (with whom Lady Hale and Lord Reed agreed) allowed the appeal. He held that the Court of Appeal had conflated two distinct concepts: the principles of no retroactivity and future effects governing EU legislation, and the exceptional temporal limitations imposed by the CJEU on its own judgments in Defrenne II and Barber. The latter were pragmatic responses to potentially catastrophic financial consequences, not statements of general principle.

Applying Maruko and Römer, Lord Kerr held that the point of unequal treatment occurs at the time the pension falls to be paid, not when contributions are made. He emphasised that Mr Walker received the same salary as a heterosexual colleague and Innospec should have anticipated potential changes in his marital status when financing the scheme. The reasoning of Advocate General Kokott in Parris v Trinity College Dublin reinforced that recognition of a future survivor’s pension is unaffected by the principle restricting payments in respect of past periods, because such recognition concerns only future scheme payments even where calculated on past service.

Paragraph 18(1)(b), in so far as it authorised restriction of benefits based on periods of service before 5 December 2005, was incompatible with the Framework Directive. Applying Kücükdeveci v Swedex GmbH and R (Chester) v Secretary of State for Justice, the provision must be disapplied because non-discrimination on grounds of sexual orientation is now a principle of EU law. The third issue under the Human Rights Act did not require determination.

Lords Carnwath and Hughes agreed that the appeal should be allowed on more limited grounds. They preferred to await the CJEU’s ruling on the Ten Oever line of authority (referred in O’Brien v Ministry of Justice) but agreed that this case was distinguishable: Mr Walker had earned a right to a pension for his spouse, and the question who qualified as his spouse fell to be answered at a date when discrimination between heterosexual and same-sex marriages was unlawful.

Implications

The decision establishes that, where an employee in an occupational pension scheme is entitled to a survivor’s pension, a same-sex spouse or civil partner must be treated equally to an opposite-sex spouse, even where the relevant service predates both the transposition deadline of the Framework Directive and the introduction of civil partnerships in the UK. The relevant moment for assessing discrimination is when the pension falls due, not when contributions accrued.

Paragraph 18(1)(b) of Schedule 9 to the Equality Act 2010 is disapplied in so far as it authorised restriction of benefits based on periods of service before 5 December 2005. The decision is significant for occupational pension schemes, employers, trustees and same-sex couples, removing a substantial inequality in survivor benefit entitlements. The judgment also clarifies an important distinction in EU law jurisprudence: the principles governing the temporal application of legislation are not to be confused with the exceptional temporal limitations the CJEU has placed on certain of its own rulings to avoid catastrophic financial consequences.

The Court left open the possibility that, had evidence established unacceptable economic or social consequences, a different outcome might have been justified, but no such evidence had been produced. The reasoning of Lords Carnwath and Hughes indicates that the broader interpretation of the Ten Oever line of authority awaits further authoritative ruling from the CJEU, so the wider implications for pension cases generally may yet be refined.

Verdict: Appeal allowed. The Supreme Court declared that paragraph 18 of Schedule 9 to the Equality Act 2010, in so far as it authorises a restriction of payment of benefits based on periods of service before 5 December 2005, is incompatible with the Framework Directive and must be disapplied. Mr Walker’s husband is entitled to a spouse’s pension calculated on all the years of his service with Innospec, provided that at the date of Mr Walker’s death they remain married.

Source: Walker v Innospec Ltd & Ors [2017] UKSC 47