Case No: C1/2010/0211
Neutral Citation Number: [2010] EWCA Civ 1098
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE ADMINISTRATIVE COURT
QUEEN’S BENCH DIVISION (MR JUSTICE BURNETT)
Ref no: CO/2343/2008
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 13/10/2010
Before :

LORD JUSTICE MAURICE KAY, VICE PRESIDENT, 
COURT OF APPEAL CIVIL DIVISION
LORD JUSTICE LONGMORE
and
LADY JUSTICE BLACK
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Between :

	The Queen On The Application Of The British Gurkha Welfare Society & Others	Appellants	
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	Ministry Of Defence	Respondent	
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(Transcript of the Handed Down Judgment of
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Mr Declan O’Dempsey and Miss Olivia-Faith Dobbie (instructed by Russell Jones & Walker) for the Appellants
Mr Rabinder Singh QC and Mr Sam Grodzinski (instructed by Treasury Solicitors) for the Respondent

Hearing date: 27 July 2010
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Judgment
Lord Justice Maurice Kay  : 
1.	In recent years courts have had to consider the unusual position of the Gurkhas on a number of occasions.  Invariably, judgments have included words of tribute to the valour of their military service and the esteem in which they are held in the United Kingdom.  Those sentiments remain undiminished.  This appeal raises issues in relation to the pension entitlements of retired Gurkhas.  Their arrangements were substantially revised pursuant to the Gurkha Offer to Transfer (GOTT) of 8 March 2007 and the Armed Forces (Gurkha Pensions) Order 2007 (the 2007 Order).  In these proceedings, the British Gurkha Welfare Society and the second and third appellants challenge the lawfulness of the GOTT and the 2007 Order.  Their challenge failed before Burnett J, [2010] EWHC 3 (Admin).  They now appeal to this Court on more limited grounds than those advanced at first instance.
2.	The historical background, going back almost two centuries, has been set out in great detail in earlier cases: R(Purja) and others) v Ministry of Defence [2003] EWHC 445 (Admin) and [2003] EWCA Civ 1345, [2004] 1 WLR 289; R(Gurung) v Ministry of Defence [2008] EWHC 1496 (Admin).  For present purposes, the material recent history was described by Burnett J as follows (at paragraphs 9-13):
“Since 1947 [the Gurkhas] have formed an integral part of the British Army … Four [regiments] transferred to the British Army, forming the Brigade of Gurkhas.  Gurkhas are recruited from Nepal.  All are Nepalese nationals on recruitment and remain so until retirement.  Their terms and conditions of service have been different from those of others in the British Army, although there has been a gradual alignment in recent years.  Before 1997 the Brigade of Gurkhas was based in the Far East, particularly in Hong Kong.  There has also been a long standing arrangement whereby one regiment is based in Brunei.  That arrangement continues.  Before 1997 Gurkhas did serve from time to time in the United Kingdom at Aldershot but their base remained in Hong Kong.  Pay and other conditions reflected the terms available to the Gurkhas serving in the Indian Army.  Leave was taken in Nepal, much longer leave than allowed to others in the British Army, and the universal assumption was that Gurkhas would retire to Nepal …
Prior to 1997, pay was much lower than for the rest of the British Army and pension arrangements entirely different.  Gurkhas are recruited at the age of 18.  Those who do not progress beyond the rank of corporal serve for 15 years.  Put simply, the position was that after 15 years such Gurkhas retired and received an immediate pension, payable for life, based on their accrued service.  No pension was payable if a Gurkha served fewer than 15 years, although almost all completed that length of service.  Those promoted beyond the rank of corporal could serve for longer and received an immediate pension on retirement.
The position for those serving elsewhere in the British Army was that no pension could be paid immediately to soldiers or non-commissioned officers unless they completed 22 years’ service.  That pension could be deferred to 60.  Those who served for less than 22 years accrued pension rights, but no pension could be taken until 60 …
The long established [Gurkha Pension Scheme or GPS] paid out pensions which were generally lower than those available to others who retired from the British Army, albeit that they were available sooner …
The return of Hong Kong to the Republic of China in 1997 gave rise to fundamental changes to the way in which Gurkhas served.  The three regiments based in Hong Kong were unable to remain there.  In consequence, since 1 July 1997 three Gurkha regiments have been based in the United Kingdom, with one at any time being stationed in Brunei.  The immediate impact was that as time passed all Gurkhas spent increasingly large amounts of their time in the United Kingdom and developed contacts and roots here; so too their families.
For some time prior to 1997 Gurkhas stationed temporarily in the United Kingdom had received a supplement to their pay.  That arrangement became a permanent fixture for those based in the United Kingdom after 1 July 1997.  The supplement brought the Gurkhas’ take-home pay up to the level of a soldier of equivalent rank in the British Army.  However, it was not treated as pensionable pay.  Pension arrangements remained as before.  The continuing assumption was that on retirement Gurkhas would return to Nepal …  Most of those retiring were in their early 30s and would develop a second career in Nepal.  Nevertheless, the pension payable could maintain a reasonable lifestyle, irrespective of whether the person concerned could (as was usual) earn additional money.  The evidence suggest that the pension of an ordinary Gurkha in Nepal equated with the pay of a captain in the Nepalese Army.”
3.	Unsurprisingly, once the Gurkhas became based in the United Kingdom, there was pressure to assimilate their terms and conditions of service with those of British soldiers.  There was also pressure to enhance their immigration status so as to enable them to remain in or re-enter this country in retirement.  This resulted in a change in the Immigration Rules so that, with effect from 24 October 2004, any Gurkha with at least four years’ service in the British Army and who had been discharged after 1 July 1997 was able to apply for indefinite leave to enter or remain in the United Kingdom.  Although such leave is discretionary, the reality is that all who have applied have been successful.  About 90% of those eligible Gurkhas discharged after 1 July 1997 have taken advantage of the change in the Immigration Rules.  They number about 2000.  There remain about 25,000 Gurkhas who are in receipt of pensions under the Gurkha Pension Scheme but who retired before 1 July 1997.
The GOTT and the 2007 Order
4.	In January 2005, the Secretary of State for Defence announced a review of the Gurkhas’ terms and conditions of service.  This development, leading to the GOTT and the 2007 Order, was explained and described in detail by Ouseley J in Gurung (at paragraphs 6-24).  The review resulted in a recommendation that serving and retired Gurkhas should be permitted to transfer from the GPS to the Armed Forces Pension Scheme (AFPS).  Those who wished to remain in the GPS could do so but it would be closed with effect from April 2006.  All this became reflected in the GOTT which applied in terms to all Gurkhas who retired or were serving on or after 1 July 1997.  The basis upon which they could transfer to AFPS was that their accrued pension based on service after 1 July 1997 would transfer into the AFPS on a year-for-year credit – effectively bringing them in line with what the rest of the British Army had accrued for that period.  For the years of service before 1 July 1997, the rights accrued in the GPS would be valued actuarially and the total of that value would be transferred to the AFPS as a pension credit.  Because the pensionable pay of a Gurkha before 1 July 1997 was considerably less than that of a soldier in the rest of the British Army at that time, the pension credit was correspondingly less.
The previous litigation: Purja and Gurung
5.	In Purja, the claimants sought to challenge the legality of various aspects of the Gurkhas’ terms and conditions of service, including the differential pension provisions.  These were challenged on grounds of irrationality and discrimination pursuant to Article 14 of the ECHR by reason of nationality which could not be justified.  Although irrationality was advanced unsuccessfully before Burnett J in the present case, it is not pursued on this appeal.  In Purja, the claimants failed on both grounds before Sullivan J and in the Court of Appeal.  There was no challenge on the basis of age discrimination.  Moreover, the case was decided before the amendment to the Immigration Rules which has enabled many Gurkhas to remain in or re-enter this country following their retirement.
6.	The claimants in Gurung had all retired after 1 July 1997 but had qualifying service before and after that date.  Their grounds of challenge to the GOTT and the 2007 Order comprised irrationality and age discrimination.  Ouseley J dismissed both challenges, holding that any indirect age discrimination was justified for the purposes of Article 14 of the ECHR.  An application for permission to appeal to this Court was refused on paper by Toulson LJ and was not renewed.
The present case: the decision of Burnett J
7.	In the present case, the second appellant retired before 1 July 1997.  The third appellant retired after that date but his qualifying service had commenced before it.  In view of the previous litigation, both faced obvious difficulties but Mr O’Dempsey sought to circumvent Purja and Gurung on the basis that Purja preceded the amendment to the Immigration Rules and, in any event, did not consider age as opposed to nationality discrimination and that Gurung, whilst it post-dated the amendment to the Immigration Rules and did consider age discrimination, was wrongly decided.  Burnett J was unpersuaded.  The relevant parts of his judgment are to be found in the following passages (at paragraphs 41-43):
“Mr O’Dempsey is, of course, correct to submit that the change in the Immigration Rules … undermined some of the assumptions supporting the decision of the Court of Appeal in Purja.  Those who retired after 1997 with the qualifying service have acquired rights to live in the United Kingdom.  The question is whether those changes have affected the reasoning of the Court of Appeal as it applies to the calculation of pension entitlements which accrued before 1 July 1997.  In my judgment they do not …  For the cohort of claimants who retired before 1 July 1997 none of the assumptions underlying the Court of Appeal’s conclusions had changed before the GOTT and the Order came into force.  For those who have retired since 1 July 1997 but had served before then, and who have (or are entitled to) settle in the United Kingdom, the assumption that their retirement would be to Nepal no longer holds good.  But the reasoning of Sullivan J and the Court of Appeal that historical differences in pay and pensions were justified before that date continue to provide ample justification for the purposes of Article 14 for the distinction drawn by the GOTT and Order between pension accrued before and after 9 July 1997.  In the context of nationality a stronger justification is required than in the context of age.  That is so even though such discrimination as there is results from a complex historical background and evolution, rather than straightforward discrimination on grounds of nationality.  Simon Brown LJ’s reasoning [in Purja] remains good, in my view, even given the changed facts which allow those who retired after 1 July 1997 with the requisite service to settle in the United Kingdom.  For the reasons which support the rationality of the policy and its proportionality in the context of indirect age discrimination, its rationality and proportionality survive scrutiny under Article 14 through the lens of nationality …  The decision withstands scrutiny.  Gurkhas with service before 1 July 1997 were in a different position from others serving in the British Army before that date.  Such differentiation in pension arrangements reflected that different position.  There is clear justification for drawing the distinction  between the actuarial and year for year transfer of pension from the GPS to the AFPS for all the reasons already summarised when considering the policy in connection with the argument advanced by reference to age.
There is at the heart of this argument an inconsistency in the approach of the claimants themselves which provides further support for this conclusion.  The Gurkha Brigade can only exist in its present form if the Ministry of Defence applies a policy of recruitment that discriminates against all other nationalities other than the Nepalese …  Those in the Brigade are also the beneficiaries of treatment denied to others in the British Army which discriminates against those others on grounds of nationality …  The claimants appear to regard discrimination on grounds of nationality as justified when it provides benefits but not when it gives rise to disadvantage.  It is difficult to see why that should be so, when all the differences, whether now of only historical interest or those continuing to have effect, flow from the unique position of the Gurkha Brigade in the British Army born of its long history of different and special treatment.  The claim based on discrimination on grounds of nationality, like that relating to age, fails.”
The legal framework
8.	Now that the appellants have abandoned reliance on irrationality and some of the other grounds of challenge pursued at first instance (including section 71 of the Race Relations Act 1976), the case is put exclusively by reference to Article 14 of the ECHR which provides:
“The enjoyment of the rights and freedoms set forth in this Convention should be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.”
9.	We are concerned here with discrimination on the grounds of national origin and age which is a relevant “other status”.  The Convention right in play is the one conferred by Article 1 of the First Protocol, upon which the Ministry of Defence takes no point.  The issues are whether the Gurkhas and their British comparator are in truly analogous situations and, if so, whether there is justification for the differences in treatment.
10.	At the time of Purja, the prevailing domestic guidance on the approach to Article 14 was the set of questions formulated by Brooke LJ in Wandsworth London Borough Council v Michalak [2003] 1 WLR 617 at paragraph 20.  Although this approach was criticised in R(Carson) v Secretary of State for Work and Pensions [2006] 1 AC 173 as being too formulaic and the “single question” approach has come to be preferred – viz “Is there enough of a real difference between X and Y to justify different treatment?”  (See Lord Hoffmann in Carson at page 186H) – Burnett J concluded that in the present case “nothing turns on the difference between the formulations” (at paragraph 35).  I agree.  In Gurung, Ouseley J adopted the “single question” approach.  I am satisfied that if it had been the prevailing approach at the time of Purja, both Sullivan J and the Court of Appeal would have come to the same conclusions.
11.	So far as justification is concerned, it is apparent that Burnett J required “stronger justification” in relation to discrimination based on nationality than he did in relation to age discrimination (paragraph 41, cited at paragraph 7 above).  In other words, in the customary language, he treated nationality, but not age, as a “suspect” ground.  Mr O’Dempsey submits that age too should be given “suspect” status because it is innate, unalterable, closely connected with personal development and central to a person’s individuality.  He cannot identify any domestic or Strasbourg authority to support this submission.  Indeed, it is difficult to reconcile with the speech of Lord Walker in Carson (at paragraphs 55 and 60).  I do not accept it, particularly in the context of the delimitation of statutory entitlements.  As it is, Burnett J found the higher degree of justification to be established in relation to nationality and it is difficult to imagine that he would not have reached the same conclusion in relation to age if he had considered the test to have been the same.
12.	At this point, it is also appropriate to refer to the question of the margin of legislative discretion.  It is submitted on behalf of the Ministry of Defence that there is a wide margin in the present case.  In R(Hooper) v Secretary of State for Work and Pensions [2005] UKHL 29, [2005] 1 WLR 1681, which was concerned with the different treatment of widows’ and widowers’ benefits, Lord Hoffmann said (at paragraph 32):
“… the European Court of Human Rights allows member states to treat groups unequally in order to ‘correct factual inequalities’ between them: see Belgian Linguistics Case (No.2) (1968) 1 EHRR 252, 284, para 10.  Furthermore, in making decisions about social and economic policy, particularly those concerned with the equitable distribution of public resources, the Strasbourg court allows member states a generous margin of appreciation: see James v United Kingdom (1985) 8 EHRR 123, 142, para 46.  In a domestic system which (unlike the Strasbourg court) is concerned with the separation of powers, such decisions are ordinarily recognized by the courts to be matters for the judgment of the elected representatives of the people.  The fact that the complaint concerns discrimination on grounds of sex is not in itself a reason for a court to impose its own judgment.  Once it is accepted that the older widows were historically an economically disadvantaged class, which merited special treatment but were gradually becoming less disadvantaged, the question of the precise moment at which such special treatment is no longer justified becomes a social and political question within the competence of Parliament.”
13.	Mr Rabinder Singh QC submits that that resonates in the present case.  Mr O’Dempsey says that it does not because here the Ministry of Defence is also the employer of the Gurkhas and that effectively narrows the margin of discretion.  It seems to me that the correct analysis is that the fact that the Gurkhas are or have been serving soldiers under the Crown is part of the context in which justification falls to be assessed but does not narrow the margin of discretion.  It is simply a factor which impacts on the formulation of policy and which, to that extent, has to be taken into account.
Discussion
14.	I now turn to the central issues which arise in relation to those in position of the second appellant (to whom I shall refer to as “the pre-1997 group”) and those in the position of the third appellant (to whom I shall refer as “the 1997 transitionals”).
(1) The pre-1997 group
15.	Although this group obtained no benefit from the amendment of the Immigration Rules in 2004, their immigration position did come to be ameliorated in 2009.  However, it is common ground that the present challenge to the GOTT and the 2007 Order has to be considered solely by reference to the factual and legal context in 2007.  Their entire service was completed before the base was moved from Hong Kong and at a time when the assumption and the reality were retirement to a life in Nepal.  The group cannot therefore rely on a relevant change of circumstances since Purja.  We are bound by the decision of the Court of Appeal in that case.
16.	In Purja, the claim based on discrimination on the ground of nationality was dismissed because it was held that Gurkha and British soldiers were not in analogous situations.  Simon Brown LJ said (at paragraph 60):
“I simply cannot recognise the two groups as being in ‘an analogous or relatively similar situation’, looking at the nature of the Gurkha Brigade as a whole – the basis and circumstances of the Gurkhas’ recruitment, service and discharge.”
See also Chadwick LJ at paragraphs 84 and 85.  Thus, the claim fell at the first hurdle.
17.	In my judgment, the authority of Purja is fatal to the case of the pre-1997 group on the nationality issue.  I should add that, quite apart from being bound by it, I am quite satisfied that it was correctly decided.
18.	In principle, Purja is not determinative of the age discrimination case because age was not raised in that case.  However, if it had been I have no doubt that it would have been rejected for the same reason, namely the non-analogy.  Moreover, as will now become apparent, I am not persuaded that the stronger case of the 1997 transitionals can succeed on the issue of justification and, accordingly, the weaker case of the pre-1997 group is wholly unsustainable.
(2)  The 1997 transitionals
19.	So far as the 1997 transitionals are concerned, Mr O’Dempsey makes a number of submissions.  There is a degree of overlap between them.  In view of the amendment to the Immigration Rules, he seeks to distinguish Purja.  His essential submissions then are (i) that Burnett J was wrong in his analysis of the relationship between service and pension entitlement; (2) that the issue of justification should not be approached on the basis of a trade-off between various benefits and detriments as between comparators; and (3) that, in any event, the judge wrongly conflated rationality and justification.
20.	The point underlying the first submission is that, unlike the position when a pension is contributory, here there is no correspondence between the time at which service took place and the way in which the pension entitlement accrued.  Accordingly, the entitlement does not simply reflect deferred pay referable to different stages of service and their different circumstances.  Reliance is sought to be placed on the Opinion of Advocate General Van Gerven in Ten Oeven v Stichting Bedrijfspensienfunds [1995] ICR 74 (at paragraph 17):
“… it is crucial to understand how occupational pension schemes, contracted out and supplementary, are built up and run.  As is clear from the observations of the governments and pension schemes appearing before the court, most of those pension schemes are characterised by their accruing nature.  In practice, an employee accrues pension entitlements on the basis his periods of service with the employer concerned.  For that purpose, contributions (calculated on the basis of actuarial factors) are periodically paid to a particular pension fund by the employee and/or employer in respect of specific periods of service.
A distinction must be made in this regard between the so-called fixed contribution schemes … and the so-called fixed benefit schemes (also called ‘defined-benefit’ plans).  In the first-mentioned schemes the benefit consists of the capitalised sum of – and is accordingly dependent on – contributions periodically made in the past by its members.  In schemes with fixed benefits, on the other hand, the level of benefit is fixed in advance (in the trust deed, constitutive rules, policy conditions or other general conditions) on the basis of the number of years of service, either as a fixed amount or as a percentage of the employee’s final salary.”
21.	Mr O’Dempsey submits that this supports his analysis of the present case as concerning an entitlement based on final salary, regardless of changing circumstances during service.  In my judgment, however, this is an inappropriate extrapolation.  The entitlement here is defined by the rules at the point of retirement.  The rules may be changed from time to time to reflect changing circumstances.  There is no appeal against the finding of the rationality of the GOTT and the 2007 Order.  The issue is Article 14 discrimination/justification.  Mr Singh invites comparison with Neill v United Kingdom, 56721/00, an admissibility decision of the Strasbourg Court, which held inadmissible a complaint by retired officers from the British armed forces in relation to widows’ pensions.  The Court said:
“… in making provision for the future payment of service pensions to servicemen and their widows, national authorities are in principle permitted to set conditions governing entitlement to such pensions and, in particular, to restrict such entitlement to those who are still in service at the time of the introduction of the new provisions, and to fix the level of entitlement by reference to the period of service completed following introduction of the relevant provisions.”
22.	In my view, this is a helpful comparison.  Even if the amendment to the Immigration Rules requires the respective positions of the 1997 transitionals and the British soldiers to be identified as closely analogous, the issue of justification remains and Neill tends to support the approach of Burnett J.  I am not persuaded that the Opinion of the Advocate General in Ten Oeven demands a different analysis, in the circumstances of this case.
23.	The submission in relation to trade-off is to the effect that it was wrong for the judge, in the passages from his judgment set out in paragraph 7 above, to trade off benefits and detriments as between the Gurkhas and British soldiers – for example, a lower pension and retirement age against longer qualifying service.  I do not accept this criticism of the judge’s approach, which reflected that of the Court of Appeal in Purja.  The approach is simply a means of identifying differences between allegedly comparable situations and is a permissible consideration of matters relevant to justification.  The pejorative term “trade off” tends to conceal that.  
24.	The suggestion that the judge conflated rationality and justification is wholly unsustainable.  As I have observed, although rationality was a live issue at first instance, it no longer is.  The appellants do not seek to appeal the finding of rationality.  It is abundantly clear from the passages in the judgment which I set out that the judge considered both rationality and justification.  Needless to say, an irrational scheme would not be justifiable but a rational one may or may not be.  At several points in his paragraphs 41 and 42, the judge expressed himself in terms that make clear that he found the GOTT and the 2007 Order to be both rational and justified.
25.	In my judgment, Burnett J was correct to hold that the treatment of the 1997 transitionals was both rational and justified.  It was entirely reasonable to provide for the transfer of pension rights calculated on a full year basis for service since 1 July 1997 but only on an actuarial value basis for service prior to that date.  The 1997 transitionals are not bound to retire to this country.  They have a choice in the way fully explained by the judge.  If they choose to do so, they will normally obtain gainful civilian employment.  There are many variables. It was not necessary for the Ministry of Defence to assume that the amendment to the Immigration Rules would be rendered meaningless because some of the 1997 transitionals may feel unable to avail themselves of their enhanced rights, for financial reasons.  Common sense and the passage of time has shown this not to be so.
Conclusion
26.	For all these reasons, I have come to the conclusion that Burnett J was correct to dismiss the application for judicial review.  Although he dismissed it on the merits, he went on to make clear that if he had come to the contrary substantive conclusion, he would have been “disinclined to grant any relief” by reason of delay.  He referred to section 31(6) of the Senior Courts Act 1981 and the detriment to good administration.  In implicit recognition of the delay, the claimants had limited their claim for relief to a declaration and had not sought to quash the 2007 Order.  As we shall be dismissing the appeal on substantive grounds, it is unnecessary for us to revisit the question of the effect of delay on relief.
Lord Justice Longmore:
27.	I agree.
Lady Justice Black:
28.	I also agree.