The first is that the Judicial Pay Claims Unit which is now called the Judicial Pay Claims Team (JPCT) is still open for business and has now received close to 5000 claims. This means that on the MoJ’s estimate there are now only a few hundred individuals who for whatever reason have not yet registered a claim.
Information on how to claim appeared in the October e-version of Counsel and can be accessed here.
The JPCT has recruited 40 extra staff and claims are now being processed at a much faster rate. Over 2,500 offers have now been sent out. One important change is that the JPCT is now making an automatic payment of the amount which it calculates to be due when sending out a formal offer to those whose bank details they hold. Such a payment is not of course binding but it does at least pretty much stop the clock running over compensation for the delay in payment.
Reaching a final settlement of the amount due is essentially a process with a number of discrete stages. The first stage is an offer by the JPCT of what they calculate to be due accompanied by a payment of that amount. The offer is backed up by a spreadsheet for each judicial office. This shows the number of sitting and training days for each pay period and the amount of any underpayment. There are also columns for fees for statement of reasons, sick pay and London weighting.
The judge then has to respond by either agreeing or disputing the number of sitting and training days which he or she has undertaken since April 2000 or appointment if later, up to 31 December 2013 which is the cut-off date for the JPCT remit over money claims. Rather surprisingly a number of judges have simply not responded at all to offers made, in some cases as long ago as last November. If you have received an offer it is in your interest to respond either to accept or reject the offer as soon as you reasonably can.
This exercise is crucial not only in determining the amount which is due but also in establishing the record of pensionable service of the individual over that same period which will ultimately be used to calculate the amount of pension to which he or she will be entitled under the new pensions schemes (see below).
Not surprisingly MoJ records do not cover the whole period since 2000 in all relevant jurisdictions. Where this occurs and if the individual judge has no records, the JPCT will use whatever other data is available to fill in the gaps in order to arrive at a fair estimate. Examples could be the total amount the individual was paid in fees during the year divided by the fee rate(s) during the year; or any pattern in the data that is available e.g. if a judge has regularly sat 50 times a year it will be assumed that they also sat 50 times a year in the period(s) in question; or (if there is a specified minimum), that he did sit the minimum number of sitting days required in the jurisdiction. There is also some doubt about the accuracy of sitting records for MHRT work which means that at the moment offers are not being made for these sittings until the issue has been resolved.
The JPCT has set up an internal appeals process which was contained in a witness statement of John Pearson, the Manager of the JPCT team and this is attached at Appendix A (see below). Where agreement cannot be reached claimants who remain dissatisfied still have the right to make a claim to the Employment Tribunal where they will bear the burden of proving that their figures are correct.
Dissatisfied claimants should note that for all sitting and training days since 2006 the MoJ also has access to the pay records maintained by Liberata which provide supporting evidence for the HMCTS sitting records.
For example HMCTS records may show that a claimant has sat for five days in a particular month and the Liberata records show that he has been paid the exact amount which corresponds with what was believed to be due for five sitting days in that month. That of course is not conclusive since Liberata rely on information from HMCTS to work out their figures. However it must follow that if a claimant says he sat for more days, then he has not been paid at all for those days on which he claims to have sat, which logically would call for an explanation why the figure was not challenged at the time.
Claimants may take some comfort from the fact that where MoJ records show a greater number of days than has been claimed for, the JPCT will use the figure which is more favourable to the claimant. Of course no human system can be perfect but where mistakes have been made the JPCT has shown a very commendable willingness to correct errors even after offers have been accepted and money paid. At the end of stage one the simple question is “Am I content with the total figures for sitting and training days and other miscellaneous items from 7 April 2000 to 31 December 2013?” If the answer is “Yes” we can move on to stage two. If the answer is “No” the claimant can use the appeal procedure at Appendix A (see below).
Stage two is now very straightforward. The JPCT has produced a series of Excel spreadsheets covering all the relevant part time fee paid offices which will calculate to the penny the exact amount of the underpayment in each case. The initial versions of these spreadsheets did contain several startling errors of principle but following a meeting in March 2015 with senior JPCT officials I am very satisfied that these errors have all now been corrected, that the formulae are all correct, and the magic of Excel will therefore produce a total figure for underpayments which is mathematically correct subject to two caveats.
There is still an unresolved issue over writing up fees for those who sit in the Social Entitlement Chamber. The President has produced a recent statement and those who sit in the jurisdiction should be well aware of the problem.
The second issue arises over the entitlement of SSRB Group 7 judges to the London Weighting allowance. The statement of policy which was issued by the MoJ in September 2014 did not properly address the issue of those who sit both inside and outside the London Group. A revised statement of policy was finally issued In January 2015. It states that those who sit both inside and outside London will initially be paid only the basic daily fee. At the end of the salary year the sitting record for the year will be looked at and if a judge has sat for at least 50% inside London he will be entitled to receive a pro rata payment of London allowance for all his sittings in that year. So a First Tier Immigration Judge who sits for 80 days in total 40 days in London and 40 days in Bristol will receive a pro rata London allowance for his 80 days of sittings.
There are two problems with that. Entitlement to London allowance for salaried judges arises where the salaried judge sits for at least 40% (not 50%) of his time in the London Group. The revised policy is therefore clearly open to challenge on the grounds of less favourable treatment contrary to the EU Directive. The second problem which is a problem for MoJ policymakers, is that the JPCT, and all credit to them, is actually paying the pro rata London allowance to judges who have been sitting for at least 40% of their time inside the London Group in any year. This issue is currently under consideration by MoJ policymakers.
However because London weighting is simply an option which the operator has to select on the relevant Excel spreadsheet it is essential that those who wish to claim London weighting make sure that the offer does include London weighting. The offer letter is accompanied by a spreadsheet and on the right hand side of the first page you will see a blue box headed current claiming. If the words London weighting appear in that box all should be well.
We have now arrived at the point where the gross amount underpaid has been determined. We move on to stage 3 which is determination of the compensation for the delay in payment. In his August 2013 O’Brien judgment Judge MacMillan held that the Tribunal has no power to award interest on money paid late but may award compensation of an interest like nature. That decision has not been appealed. At the moment the MoJ are using what is called the Preston formula.
This is a formula devised by the Government Actuary based upon the return on 5 year National Savings Bonds. This formula has not been subject to any judicial determination so at the moment it can probably best be described as a fairly reasonable pragmatic solution to a practical problem. Mr O’Brien has accepted it for his claim but there are certainly other reasonably arguable alternatives. The practical problem for claimants is that the cost of establishing a binding precedent alternative is very likely to outweigh the benefit to any one individual. Empirical calculations have not shown any startling differences between the Preston method and other alternatives
Tax and National Insurance
A. Tax on the underpayments
The MoJ have sought advice from HMRC. The gross underpayment figure clearly represents arrears of pay and is therefore subject to tax and, where appropriate, National Insurance at the contracted in rate, in the year in which payment is made. For those still in office tax and National Insurance will be deducted under PAYE. For those who are no longer in office tax and, where appropriate, National Insurance at the Class 1 contracted In rate will be deducted in accordance with Revenue Practice covering payment after leaving. The Revenue practice leaflet requires the employer to provide a letter in lieu of Form P45 confirming the amount of tax deducted. At the moment such letters are not being provided and the MoJ are considering a request that they comply with HMRC instructions.
B. Tax on the compensation
On advice from HMRC the MoJ policy is to deduct tax from the compensation. This may seem surprising but the HMRC view is that the compensation is derived from taxable earnings and is therefore itself taxable income of the recipient. It has been pointed out to the MoJ that if tax is being deducted under Chapter 15 of the Income Tax Act 2007 there is an obligation on the paying party under section 975 to provide a certificate of deduction in Form RF185.
The MoJ are currently considering this issue. Any judge who wishes to challenge whether these payments are liable to tax at all must do so by the normal HMRC appeal process to the First Tier Tax Tribunal.
C. Spreading the payments
There will be cases where the gross amount of the arrears payment combined with other income takes a judge into the higher rate on earnings over £150,000. It may therefore be advantageous in such cases to ask the Revenue for the payments to be spread over the tax years in which the arrears were actually earned.
D. Deductions for Pension Contributions
All salaried judges who are members of the 1993 Act scheme have to pay contributions towards the cost of the dependents’ pensions at the rate of 1.8% of salary. Since April 2012 contributions have also been due towards the cost of the personal pension.
Although it is obvious that part time fee paid judges would have to make similar contributions in principle there was initially some doubt over the way in which these would be calculated. As a precautionary measure the MoJ has instituted a policy of deducting 3% of the gross award multiplied by the number of years served against the individual’s past liability for these contributions. Since the policy was instituted the MoJ has decided first that the rate of contributions will be identical to those which salaried judges are required to pay and second that the contributions will be assessed on actual earnings. The 3% deduction is consequently over generous to the MoJ but will continue as an ad hoc arrangement. The MoJ acknowledges that when the new scheme finally comes into effect the figures will have to be recalculated and adjusted for each individual. This is not going to happen before March/April 2016.
E. Special arrangements for those who have already retired
Salaried judges who retire are entitled to a lump sum equal to 2.25 times the annual pension and a service award which is equal to the tax on the lump sum. The MoJ has confirmed that in principle part time fee paid judges will be entitled to the same. At the moment all that is being paid is the lump sum less tax. Payment of the service award will be made once the new pension scheme is established. The target date for this is still March 2016. To avoid those who retire having to wait until March 2106 for the first pension payment the MoJ is making an ex gratia payment on account of the basic pension for the period from retirement to 31 March 2016. The intention is to pay the service award and any adjustment of the pension due when the new scheme is established
The money claims process should now run reasonably smoothly until all claims have been dealt with. Up to 31 March the JPCT was concentrating on getting offers and payments out to as many claimants as possible. As well as processing the remaining claims it is now dealing with outstanding issues over offers made before 31 March which remain to be resolved.
The new Pension scheme
Negotiations over the new pension scheme for Part Time Fee paid judges are very nearly complete. The MoJ has responded positively to the responses to the original Consultation Paper and there is a good chance that the new scheme will be agreed without further litigation. The Employment Tribunal will be holding a Preliminary hearing during the summer. For those who wish to know more about the new scheme there will be a free lecture in the Atkin Lecture theatre at Gray’s Inn at 6 p.m. on 22nd June to bring you up to speed on the fundamental changes taking place in the pension arrangements for part time fee paid judges.
His Honour John Platt
Appendix A - Extract from the witness statement of John Pearson dated 19 September 2014.
12. Where a claimant rejects the offer of settlement, is unhappy with the information provided or (in the case of non-litigants) disagrees with the decision that they are ineligible to claim, the following escalation route will be applied:-
The claimant should set out their dissatisfaction with reasons to the Judicial Pay Claims Team by e-mail or by letter. The Pay Claims Assistant will aim to resolve the matter within ten working days.
If the claimant is not satisfied with the response at first contact the matter will be referred to a Pay Claims Team leader who will review the first contact letter, take into account any new evidence and then reply to the claimant within ten working days. The reply will either confirm the previous line taken or offer and give reasons for an alternative resolution.
If the claimant wishes to appeal the decision of the Pay Claims Team leader it will be referred to me as Pay Claims Team Manager who will review the Frist Contact and Review Stage Replies. I will either confirm the line taken in the previous stages of offer and give reasons for an alternative resolution and will do so within fifteen working days.
My decision as Pay Claims Team Manager will be final and represents the final decision on the matter within the Ministry of Justice. Any appeal decision does not affect the claimant’s statutory right to take their claim to the Employment Tribunal.