Following a pay re-structuring exercise, the Appellant was paid on the scale of 9.38 (i.e. within scale 9) although oficially she was still at scale 8. This was purely a mechanism so that the employer could regrade the existing employees without them being paid less than before. In 2004 the pay structure for grade 9 employees was altered and the pay allocated to the various levels was increased. The important point, now relied upon by the appellant, is that the pay allocated to SCP 9.38 was increased by some £2,364.90 as from 1 October 2004. However, when the Appellant retired on a final salary pension, she brought a claim that her pension benefits should be based upon the higher grade 9.38 salary. She lost.

The appeal against the dismissal of her claim was dismissed. The Claimant's placement in grade 9.38 was not because she held a grade 9 post, as indeed she accepted. That was made crystal clear in the letter she received following the job evaluation in 1999. So the terms of her contract did not entitle her to benefit from pay increases which were intended only for officers whose posts were properly characterised as grade 9 posts.

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Case No: B2/2015/0252/CCRTF

Neutral Citation Number: [2017] EWCA Civ 23

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE GUILDFORD COUNTY COURT

MR RECORDER LYDIARD QC

2YK69727

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 24/01/2017

Before :

LORD JUSTICE LONGMORE

LORD JUSTICE ELIAS

and

LORD JUSTICE DAVID RICHARDS

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Between :

LILLIAN WILLIAMS (Appellant)

- and -

SURREY HEATH BOROUGH COUNCIL (Respondent)

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Mr Richard Egleton (instructed by Direct Public Access) for the Appellant

Ms Caroline Allen (instructed by Surrey Heath Borough Council Legal Services Department) for the Respondent

Hearing date : 14 December 2016

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Judgment

Lord Justice Elias :

1. The appellant commenced employment with the Bagshot Rural District Council as a cashier on 30 September 1968. Following local government re-organisation her employment was transferred to the respondent, Surrey Heath Borough Council ("the Council"). Thereafter she was employed as an accountancy assistant, an exchequer officer, and latterly as a revenue control officer.

1. In 1999 the respondent introduced a new pay structure. This was part of a job evaluation scheme. Under the scheme posts were allocated to the appropriate position on a pay structure which contained nine grades, SH1 to SH9. Within each grade there were sub-divisions referred to as "spinal column points (SCP)". Absent some good reason, such as poor performance, an employee would expect to gain one SCP increase per year until he or she had reached the top SCP for that particular grade. Thereafter the employee would have usual cost of living increases, but the grade and the SCP within it would remain the same unless and until the individual concerned was promoted to a new post in a higher grade.

1. As inevitably happens when job evaluations of this nature are carried out, some jobs are found to have been under-valued in the past and some over-valued. Where they are under-valued, that is easily remedied by placing the employee in the grade and on the spinal column point which it is thought properly reflects the value of the job done by that employee. The employee thereafter receives the increased pay referable to that point on the scale. Where the result of the re-evaluation is that jobs have been over-valued, there are difficulties because if the employee is placed in the appropriate grade and SCP, that will generally involve a reduction in pay. To counter this, there will typically be arrangements put in place to protect the pay of such employees and to ensure that their pay is not reduced as a consequence of the job re-evaluation.

1. In this case the Council sought to do that either by allowing the staff to remain on their old pay scales or by accepting what were termed "personal grades" for such workers. They would be placed in the grade and on the spinal column point which would reflect as closely as possible, and be no less favourable than, their current pay. They would be allowed to move up the SCPs in that grade until they reached at least the maximum which they could have attained in the position they occupied before the new job evaluation was introduced. Sometimes this meant that their pay would be fixed by reference to payments which were strictly only for jobs located in a higher grade.

1. That was the position with Mrs Williams. She was sent a letter dated 25 February 1999 from Mr Malcolm Lee, the Council's Chief Personnel Officer, which explained the new structure and then specifically described its application to her in the following way:

"… the assimilation of your current post into the new grading structure is based on the results of a job evaluation exercise … The panel evaluated your current post … The result of this evaluation equates to a grade in the structure of SH8.

As the maximum basic salary of your current grade is higher than that of the evaluated grade on the new structure you are offered a new personal grade consisting of the evaluated grade for your post plus a number of incremental points from the next most senior grade so that the maximum basic salary of your new personal grade is no less than that of your current grade as follows:

Spinal column points Basic salary

9.38                          £34,467

9.37                          £32,508

8.36"

1. It was made clear that she was to be paid on spinal column point 9.37 but could rise to 9.38 although no further. That was the maximum she could have achieved under the old system if her job had remained the same. The spinal column points in grade 9 in fact went up to 9.42 but she could not take advantage of that because she was not a grade 9 employee; her post equated to a grade 8, as the letter expressly informed her. The fact that her salary was fixed by reference to SCPs in grade 9 did not alter that fact or convert her into a grade 9 employee.

1. Mrs Williams formally accepted the offer made in the letter and was paid by reference to grade 9.37. Thereafter she was promoted to the scale point at 9.38 in early 2000 but could not thereafter improve her SCP level. She did, however, benefit from general pay awards in the same way as every other worker.

1. Then in 2004 there was a new grading exercise carried out for what the authority referred to as its "top management". New grades of SH9+, SH10, SH11 and SH12 were introduced. Annex D to an internal memorandum dated 24 May 2004 shows that the new system was intended to apply to heads of department and similar status employees and above. It is conceded that the appellant did not fall into that category. Under this new structure, the SCPs for grade 9 were altered and the pay allocated to the various levels was increased. There was no longer any 9.37 level but there were six salary levels within SH9 from 9.38 to 9.43. The important point, now relied upon by the appellant, is that the pay allocated to SCP 9.38 was increased by some £2,364.90 as from 1 October 2004.

1. The appellant retired from the Council as part of a redundancy exercise on 3 January 2005. The Council chose to exercise a discretion conferred by law to increase her period of pensionable service so as to deem her to have worked the maximum of forty years. This involved adding a period of 3 years 269 days. Thereafter her pension and redundancy payments were calculated by reference to the forty years' service and her final salary. The Council took this to be £42,144 rather than £44,508 which it ought to have been if she was, as she now claims, entitled to the increase allocated to SCP 9.38 with effect from 1 October 2004. At the time she accepted that figure but subsequently she has submitted that her redundancy pay and her ongoing pension payments were all under-calculated as a consequence of the wrong final salary being adopted in the relevant calculations.

1. The pension payments were not in fact made by the Council but by Surrey County Council on the Council's behalf. They would then recoup the sums paid out from the Council on terms agreed between the two Councils. In fixing the relevant pension payments, including the lump sum element, Surrey County Council relied on the information supplied by the respondent Council. It is alleged, inter alia, that it was a breach of contract for the Council to give the wrong figure for the final salary to Surrey County Council.

1. The essence of the appellant's complaint is very simple: she says that her contractual right was to be paid whatever salary was allocated to SCP 9.38. When that sum was increased following the 2004 restructuring, she was entitled to it in the same way as any other employee on that grade. She further submitted that by refusing to pay the increase to her, the Council was in substance placing her on a completely new grade which was not found on the Council's salary scales at all.

1. The Council, for its part, submits that this is a misconception. She was never properly to be considered as someone employed on grade 9. She was always a grade 8 officer, as indeed she expressly accepts. The restructuring in 2004 did not involve any re-jigging of grade 8 posts. The fact that she was SCP 9.38 did not give her the right to the salary attached to that particular spinal point in all circumstances. She occupied a particular personal grade designed to protect her pay as a result of the earlier re-evaluation of jobs in 1999. She was never intended to be a beneficiary of the new pay structure and she had no contractual right to the increase because it did not relate to her post.

1. The Council concedes that it was unfortunate that this was not explained to Mrs Williams and similarly placed employees at the time to avoid any possible confusion. The explanation was subsequently given by a letter to staff dated 2 August 2005, although Mrs Williams herself had retired by then.

1. Mrs Williams took proceedings in order to obtain a declaration as to what her final salary ought to have been, and also claimed damages for breach of various contractual rights including loss of pay and pension. Some of these failed on the grounds that they were time-barred and were struck out by the District Judge. The details are not now material to this appeal.

1. When the case came before Mr Recorder Andrew Lydiard QC, sitting in the Guildford County Court, he was concerned only with certain aspects of her pension payment. The arguments advanced before him, and indeed pursued in the skeleton arguments before us, were highly convoluted. It is not necessary to engage with them because it became clear during the course of oral argument before us that the essential difference between the parties is as I have set it out above: did she have a contractual right to be paid whatever salary was attached to grade 9.38 in all circumstances? If so, she has been underpaid; if not, she has no legitimate complaint.

1. In my judgment, the Council's argument is clearly correct. There were in effect two different categories of officers on SPC 9.38, those where the scale properly reflected the value of the job, and those where the scale did not reflect the value of the job but were personal grades conferred for protected pay reasons. The restructuring in 2004 was not intended to touch upon the latter category. The new pay scales were only for those whose posts were valued as grade 9 posts. Her placement in 9.38 was not because she held a grade 9 post, as indeed she accepted. That was made crystal clear in the letter she received from Mr Lee following the job evaluation in 1999. So in my view the terms of her contract did not entitle her to benefit from pay increases which were intended only for officers whose posts were properly characterised as grade 9 posts. It was not necessary, in order to protect her pay in the way her contract envisaged, to allow her to take advantage of the increase in salary. It would have given her an unjustified pay increase unrelated to the value of her post and would give her far more than the pay protection which she was contractually promised. The fact that it left her (and other similarly placed workers) in an anomalous grade is in my view irrelevant. The question is what her contract required, and in my view the Council honoured its terms.

1. The respondent raised alternative arguments of limitation and laches, contending that the claims were lodged out of time. In the event these questions do not arise and I say no more about them.

1. I would dismiss the appeal.

**Lord Justice David Richards**:

1. I agree.

**Lord Justice Longmore**:

1. I also agree.