South Tyneside Metropolitan Borough Council, R (on the application of) v The Lord Chancellor & Anor

Where an employer has former employees who remain deferred members or pensioners in one fund, its liability to contribute under the pension scheme regulations is not necessarily confined to a fund containing its current active members. Where the statutory language reasonably permits competing constructions, the court may consider the likely consequences of each construction, avoid injustice and advance the legislation’s purpose. The language must nevertheless govern if it inevitably requires the competing interpretation. The regulations were therefore construed so that an employer participating in the Scheme could remain liable for contributions to a fund containing its former employees, even though its current employees participated in another fund.

The claimant, administering authority for the Tyne and Wear Pension Fund, challenged the First Defendant’s refusal to accept a £214,000 liability identified by an actuary under the Local Government Pension Scheme Regulations 1997. The liability related to former employees of abolished magistrates’ courts committees who remained deferred members or pensioners of the Fund, while current employees of the successor committee participated in another fund within the Scheme.

The central issue was whether Regulation 79 required an employer to contribute only where it currently employed active members of the particular fund, or whether liability could also arise in respect of former employees remaining in that fund.

1. Interpretation. The claim succeeded. Regulation 79 was to be interpreted in the manner contended for by the claimant. An “employing authority” could include a body currently employing employees eligible to be members of the Scheme, even where the relevant liability concerned deferred members or pensioners in another fund within the Scheme.
2. The court accepted that the First Defendant’s construction was linguistically possible, but it would create injustice. It would leave the remaining employers in the Fund to meet liabilities attributable to employers whose employees had transferred to another fund. The claimant’s construction fairly distributed pension liabilities among employers whose employees benefited from the Scheme and better advanced the likely legislative purpose.
3. Regulation 2(2), which generally referred to members and membership as active members and active membership, was expressly subject to the context. Regulation 4 distinguished eligibility to be an active member from eligibility to be a member. In context, deferred members and pensioners remained members for the purposes of the Regulations.
4. Regulation 77(10)(c), requiring relevant documents to be sent to bodies which were or might become liable to make payments to the fund, was not confined to liabilities arising under Regulations 78 or 91. It supported the conclusion that liability could exist despite the absence of current employees contributing to the particular fund.
5. The actuary had therefore lawfully specified the £214,000 sum, and the First Defendant was obliged to accept that liability. The court proposed to make judgment for that sum and a declaration concerning the future meaning of Regulation 79, subject to any representations about the precise form of the order.