Hampshire v The Board of the Pension Protection Fund

Article 8 of Directive 80/987/EEC does not require full protection of occupational pension rights, but the majority provisionally considered that it requires protection of at least half of accrued benefits. The issue was not acte clair and was referred to the CJEU. The Court held that the Marleasing obligation permits a conforming interpretation only so far as it does not alter a fundamental feature of domestic legislation or go against its grain. Removing the statutory compensation cap would replace it with a new pension floor and was therefore impermissible. The related question whether Article 8 had direct effect was also referred.

Mr Hampshire appealed against an order of HH Judge Cooke dated 23 December 2014, made on preliminary issues in his statutory appeal under section 217 of the Pensions Act 2004. The dispute arose from the Board’s approval under section 144 of a valuation of the T & N Retirement Benefits Scheme following the insolvency of scheme employers.

Mr Hampshire’s compensation was reduced by the cap in Schedule 7 of the Pensions Act 2004. He argued that Article 8 of Directive 80/987/EEC required at least half of his accrued occupational pension benefits to be protected, that the provision was directly effective, and that the domestic legislation should be read down under Marleasing principles. The central questions were the minimum protection required by Article 8, direct effect, and whether the cap could be modified by interpretation.

1. Article 8 and the preliminary reference. The Court was divided on the interpretation of Article 8. The majority provisionally considered that Robins established a universal minimum level of protection, and that Hogan confirmed that benefits below half of accrued entitlement could not satisfy the obligation. The majority therefore rejected the narrower reading adopted below. The point was not acte clair, particularly because the schemes considered in Robins and Hogan differed materially from the statutory scheme under consideration. Questions on the meaning of Article 8 were accordingly referred to the CJEU.
2. Marleasing construction. The Court accepted the broad interpretative obligation explained in Vodafone 2 v Commissioners for Her Majesty’s Revenue and Customs [2010] Ch 77, Swift v Robertson [2014] UKSC 50 and Case C-350/03 Schulte v Deutsche Bausparkasse Badenia AG [2006] 1 CMLR 11. Domestic legislation must, so far as possible, be interpreted in the light of the wording and purpose of the Directive.
3. That obligation has limits. The Court must not adopt an interpretation which changes a fundamental feature of the legislation, undermines its essential principles, or goes against its grain. The proposed reading of paragraph 26 of Schedule 7 would remove the compensation cap and replace it with a new minimum floor. That would significantly alter the form and financial structure of PPF protection. It was therefore not a permissible Marleasing-compliant construction. The Court applied the approach in Vidal-Hall v Google Inc [2015] EWCA Civ 311; [2015] 3 WLR 409.
4. Direct effect and further issues. Direct effect requires a provision to be precise and unconditional. The Court considered, but did not finally resolve, whether Article 8 satisfied those requirements after its interpretation by the CJEU and whether the designation of the PPF as guarantor was sufficient. Those questions were included in the reference. The Article 47 Charter argument and remaining enforceability issues were deferred.

• Court of Appeal (Civil Division) — The Court determined the Marleasing issue, provisionally addressed the Article 8 minimum-protection issue, and directed a reference to the CJEU on Article 8 and direct effect.
• High Court of Justice, Chancery Division — HH Judge Cooke’s order dated 23 December 2014 determined preliminary issues arising in the statutory appeal. The judge rejected the argument that Article 8 imposed a universal 50% minimum and did not permit the proposed reading down of the compensation cap.