Hogan Lovells

Key Dates

R v SoS Ministry of Housing, Communities and Local Government and interested parties [2021] EWHC 1436 (Admin).

Judgment given on 27 May 2021.


Summary

The High Court has dismissed an application for judicial review by Amey PLC and its subsidiary, Enterprise Managed Service Limited (EMS).  EMS provided environmental services to two local councils (the interested parties) under a seven year contract entered in 2011.  EMS participated in the Local Government Pension Scheme (LGPS) for the duration of the contract.  As a participating employer in the LGPS, EMS was liable to pay ongoing employer contributions and an exit payment, if its fund in the LGPS was in deficit at the termination of the contract.  However, “pass through” arrangements with the local councils meant that EMS’ liability to the LGPS was either indemnified by the councils or reflected in the contract price. 

Changes made in May 2018 to the regulations governing the LGPS introduced an entitlement for exiting employers to receive an exit credit payment from the LGPS, if at the date the employer ceased to participate in the LGPS its fund was in surplus.  EMS’ contract with the councils expired in June 2018 and an actuarial certificate showed a £6.5m surplus in its LGPS fund.  The local council later refused to pay the exit credit and in March 2019 EMS issued a claim for payment in the Chancery division of the High Court.  The claim was stayed in light of proposals to amend the LGPS regulations (please see below) and pending judicial review proceedings.

At this time, wider concerns were expressed about significant liabilities becoming due from the LGPS to exiting private sector employers.  It was suggested that the exit credits due considerably exceeded the contributions paid by the exiting employer and that surpluses in the particular employers’ funds were due to market performance of assets accumulated before the employers concerned started to participate in the LGPS.

To address these concerns, the LGPS regulations were further amended by regulations in force on 20 March 2020, to make payment of an exit credit discretionary rather than mandatory, to be decided by the authority administering the relevant part of the LGPS.  The March 2020 amendments had retrospective effect from 14 May 2018 (the date an entitlement to an exit credit was introduced).  The 2020 changes therefore had the effect of retrospectively extinguishing EMS’ Chancery claim for payment of the exit credit.

EMS and Amey PLC applied for judicial review of the retrospective effect of the 2020 amendments, arguing that it breached EMS’ right to a fair trial under Article 6 of the European Convention of Human Rights (ECHR) and its right to peaceful enjoyment of its possessions.

The High Court held that Article 6 ECHR was engaged, meaning that the interference with EMS’ right to a fair trial would be in breach of Article 6 unless the interference was justified in the public interest.  Here, the exit payment could be characterised as a windfall, and EMS and the local councils had contracted on the basis of known potential pension liabilities but without adjustment for a possible exit credit.  It was significant that the surplus exceeded the contributions paid by EMS and arose from investment performance of a fund which did not originate from EMS.  In addition, correction of the LGPS regulations was being expressly considered at the time the Chancery claim was made, and so could have been anticipated by EMS.  The interference with EMS’ Article 6 rights was therefore justified.

In addition, if the claim to an exit credit was a possession (which was disputed), interference with EMS’ property rights would also be justified in the public interest, for similar reasons.



Date Accessed: 28/05/2022