Hampshire v PPF [2016] EWCA Civ 786 (28 July 2016)

Mr Hampshire is challenging the level of compensation he is entitled to from the PPF, following the insolvency of his employer. In the opinion of the Court of Appeal, several issues of EU law need clarification.  The CA has therefore decided to refer certain questions to the CJEU.


Article 8 of the EU Insolvency Directive

Directive 80/987/EEC (“the Directive”), now superseded by Directive 2008/94/EC (which is materially identical) deals with the protection of employees in the event of the insolvency of their employer.

Article 8 of the Directive requires that Member States ensure that “necessary measures” are taken to protect the interests of employees and former employees “in respect of rights conferring on them immediate or prospective entitlement to old-age benefits, including survivors’ benefits, under supplementary company or inter-company pension schemes outside the national statutory social security schemes.”

PPF compensation

The PA04 provides for compensation to be paid by the PPF to members of a qualifying scheme, amounting to either 90% (for deferred members, or those below the pension scheme’s normal pension age at the PPF assessment date) or 100% of the pension payable under a scheme’s rules (see our summary of PPF benefits for details). Those who have not attained normal pension age by the PPF assessment date are also subject to the PPF’s compensation cap.  The cap is set annually and currently stands at £37,420.42 (which equates to £33,678.38 when the 90% level is applied). In addition, the PA04 limits the indexation of PPF compensation payments to pension entitlement attributable to pensionable service post-1997.

The facts

Mr Hampshire was 58, and four years from being able to take his benefits unreduced, when his employer, Turner & Newall Limited (“T&N”), became insolvent. The T&N pension scheme entered PPF assessment on 10 July 2006.  The PPF had approved a valuation of the assets and liabilities of the scheme provided by the employer (under s.143 PA04).

Mr Hampshire calculated that he would be entitled to a pension after adjustment for a lump sum of £19,819 per annum from the PPF. As he would have been entitled to a pension of approximately £76,302 per annum from the Scheme, he argued that he was suffering a reduction of about 67% from his contractual entitlement.

Mr Hampshire complained to the board of the PPF (“the Board”), and then to the PPF Ombudsman, who rejected his appeal. Mr Hampshire then brought High Court proceedings against the Board, arguing that Article 8 of the Directive, as interpreted by the earlier cases of Robins v Secretary of State for Work and Pensions [2007] (“Robins”) and Hogan v Minister for Social and Family Affairs [2013] (“Hogan”), obliged Member States to ensure that measures were in place to guarantee that compensation to members would represent at least 50% of the benefits to which they were entitled under their schemes.

In brief, Robins (which pre-dated the introduction of the PPF) had suggested that domestic insolvency law which could, in certain cases, lead to a guarantee of less than half of an employee’s entitlement, could not be considered to fall within the definition of the word “protect” used in Article 8. The CJEU in Hogan then considered Robins in its deliberations. It noted that Ireland’s failure to put adequate measures in place, following Robins, to ensure that members of occupational schemes would receive in excess of 49% of the value of their accrued pension benefits, constituted a serious breach of its obligations and, as such, could entitle the claimants to damages.

The High Court in Mr Hampshire’s case did not agree that these cases now meant that a minimum level of compensation had to be guaranteed by Member States, finding it “inconceivable that the ECJ would hold that it was unlawful per se to impose a cap on protected benefits”.

Mr Hampshire appealed the decision of the High Court.

The Court of Appeal considered, but could not agree, whether Article 8 of the Directive and relevant EU case law could be said to confer universal minimum entitlement in terms of pension protection.

As the statutory schemes under consideration in Robins and Hogan were very different from those falling under the remit of the PA04, and Hogan was agreed only to be an application of Robins, it needed to be determined what the effect of Robins was.  This meant the point was not “acte clair” (reasonably clear and free from doubt), and so the Court proposed to refer the question to the ECJ before determining this point on appeal.

If Article 8 of the Directive did require provision of a certain level of pension benefits an employer’s insolvency would then be necessary to consider how this should be enforced.

For the provisions of a Directive to directly confer rights on to individuals of EU Member States (this is known as “direct effect”) they must be both precise and unconditional.

It was not clear to the Court that these criteria were met.

It was therefore decided that the question should be referred to the CJEU.

Next steps

The questions to be referred to the CJEU will be formulated following the delivery of the judgment, and it is likely that it will then take some time for the CJEU to undertake its consideration of the case.